Tuesday, August 25, 2015

China Subsidizes Purchase of Substandard Wheat

In Henan Province, winter wheat output (harvested in the summer) in 2015 was 35.2 million metric tons, up 5.2% from last year. However, heavy rains in the southern part of the province around harvest time caused wheat kernels to mold and fall short of standards for purchase. It could only be sold to feed mills at a substantial discount or stored by the farmer.

As of August 15, only 16.4 mmt of Henan province's wheat harvest had been purchased, 3.4 mmt less than at the same time last year. There were similar problems in parts of neighboring Anhui Province. By August 7, eight million metric tons of Anhui's wheat had been purchased, 2.69 mmt less than last year.

Henan Province has allocated 15 million yuan (about $2.35 million) to subsidize purchase of the substandard wheat. The funds will be issued to prefecture and county governments in affected regions and used to subsidize interest on loans to processing enterprises purchasing the moldy wheat. The loans are made by the provincial branch of the government's Agricultural Development Bank of China. The Henan regions with bad wheat include Nanyang, Luohe, Xinyang, and Zhumadian. The provincial grain bureau directed traders and brokers to make efforts to buy the substandard wheat but to keep it separate from the good stuff.

Anhui officials launched a "temporary reserve" program to purchase 500,000 metric tons of substandard wheat in key counties of eight prefectures. An Anhui grain bureau official said the program's purpose is to "broaden the quality standards for purchasing wheat with 10% to 20% substandard kernels." The province claimed to have purchased 27,194 metric tons of wheat under this program as of August 7.