Vice Director of the Grain Bureau, Ren Zhengxiao, said at a recent conference that policy-type purchases of wheat, rice, and corn were down 66% year-on-year for the January-November period of 2010. Since grain prices were rising this year authorities didn't have to buy as much grain at support prices.
State-owned enterprises still were the main purchasers of grain. They bought 109.6 million metric tons (mmt) of grain during January-November, accounting for 46% of all purchases. While the amount of policy-type grain purchases was down this year, procurement at minimum prices still accounted for nearly one-third of purchases.
By my calculation this means total purchases of grain for January-November totaled 238 mmt, over 40% of grain production (540 mmt). This implies still over half of grain is used on farms and never enters the formal marketing system.
State-owned enterprises took advantage of rising prices to sell off grain they had stockpiled in 2009. Sales of grain totaled 170 mmt for January-November, 23 mmt higher than last year.
This situation "reduced losses and increased profits" for grain enterprises. Total profit for January-November was 4 billion yuan.
However, the article says that the profit situation has deteriorated since October, especially in Heilongjiang, Jilin, and Henan provinces. Inflationary expectations heated up, some "structural conflicts" contributed to grain price increases in production areas, and state-owned enterprises faced "relatively big market risk."
Some analysts, says the article, think this announcement reflects a dilemma faced by the government. Soaring prices help companies make profits (by selling off inventories), but the rising prices also "pose a threat to government food reserves."