Tuesday, April 28, 2009

Cash for On-Farm Grain Storage

At a meeting on April 22, Premier Wen Jiabao announced that the central government will start giving farmers subsidies to build improved grain storage facilities.

Most grain inventories are held by state-owned grain enterprises at different levels--national, provincial, and local--and commercial enterprises. According The amount of grain reserve storage reported by different departments varies. The Grain Bureau says 350 mmt; the Ministry of Agriculture says 300 mmt; the National Development and Reform Commission says 250 mmt. I think this is capacity, not amount in inventory. If facilities are near capacity, China has more than half a year's production/consumption in storage. The FAO guideline is 17-18%.

According to Li Chenggui, a researcher at the China Academy of Social Sciences, about half of China's grain stocks have been held by farmers in recent years.
After 5 consecutive big grain harvests and a big grain purchase program to support prices this year, storage facilities are overwhelmed.

There are varying stories on how much grain farmers hold. According to one expert, farmers held 2-to-3 years' of grain consumption in inventory in the early years of "reform and opening" [1980s and 90s], but grain stock-holding has fallen as farmers have migrated to cities and figured out they can buy grain if they need it. According to the expert, many young farmers don't store any grain while older farmers still keep 6-to-12 months of grain consumption on hand.

Li explained that farmers have low storage costs, but facilities are poor. [They usually store it in 50-kg bags somewhere in their house, courtyard, or attic.] A lot of grain is lost due to mold, pests, etc. The idea is that less grain will be wasted and farmers can store it until the price is right if they have better storage facilities.

Due to various conditions [unspecified] the subsidy program will be limited to relatively few large-scale farmers in major production areas. It will not be available to most "common" farmers.

No comments: