Thursday, May 10, 2012

Lots of Grain Held on Farms

In April every  year local price bureaus conduct surveys of grain inventories on farms and sales over the past year. The surveys are based on small samples of farm households--about a dozen per county--who keep records of expenses, production and sales. Reports from a few random provinces and counties are published online.

A review of a handful of these reports shows that it is virtually impossible to draw any general conclusions about what's going on in Chinese grain production. Average grain inventories held by Chinese farms ranged from under 400 kg in Changping (Shandong) to 2837 kg in Baoji (Henan). These are inventories held as of April 1, before the summer harvest. If we take a rough median of 500 kg per farm and multiply it by 200 million rural households, the total would be 100 million metric tons held on farms.

Inventories went up overall but there was a lot of variation. In Anhui Province rice inventories went up but wheat and corn inventories went down. In Nanyang, Henan, wheat inventories went down 13% but corn inventories went up 10%.

Average grain inventory per farm, April 2012   Inventory Change from last year
kg percent
Anhui Province 541 -5.8
Jiangxi Province 1119 16.0
Henan Nanyang 653 5.4
Henan Baoji 2837 6.8
Shandong Changping 397 55.0

Several of the reports reflect major changes in rural China. Large numbers of rural household members have left the village while elderly parents and children stay in the village. In most cases the outmigration does not mean that fields are abandoned. Several reports say elderly people want to keep tending crops. In Anhui, the migrants return for the grain harvest work. However, the report from Baoji in Henan says the area is heavily populated, transportation is poor and few people leave for work elsewhere.

Most of the reports say grain consumption by rural households is going down and they are selling more. The first reason is because many household members have left to work elsewhere. Another reason is diversification of diets. In Changping, Shandong Province, home consumption of grain fell 47% this year. The Changping report says that there are few farmers raising pigs and chickens now so the use of grain for feed on-farm is decreasing.

In contrast, a growing grain deficit is reported in Aksu, a region populated by Uighur minority people in far western Xinjiang. A detailed report on grain production and stocks says in this area is seriously short of grain. Households are accustomed to growing and consuming wheat. Aksu's wheat production fell 27% in 2012 and corn output fell 45%. The decline is entirely due to decreased area planted. The report says the relative profitability of grain is still low despite government subsidies for production and marketing. The report says most Aksu households are short of grain but a table shows they hold 28% of the grain inventories in the region. Statistics reported that grain consumption by rural households in Aksu increased 7% last year. Wheat inventories in Aksu fell from 41,000 metric tons to 27,000 metric tons last year while rice inventories remained stable at about 25,000 mt. The report's supply-demand balance shows that Aksu had a large corn deficit of 58,500 mt bought from other regions.

There are contradicting stories reported about the effect of rising living standards on grain-selling patterns. A couple of reports say farmers are not very concerned about selling grain and sell it all at one time. Others report that farmers have other sources of cash and don't need to sell in a hurry, so they hold on to their grain waiting for the price to go higher.

Most of the reports say farmers prefer to sell to private traders who come to their door to buy grain, pay promptly and have no complicated procedures. This more convenient for farmers, saving them time, work and transportation costs.

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