Province Stockpiles Substandard Wheat

Farmers in Anhui Province hit by heavy rain this summer will be able to sell their substandard wheat to provincial authorities at a premium price.

Procurement of China's wheat crop this year is slower than usual because a large proportion of wheat has been degraded in quality by effects of the wet weather. As of July 15, a total of 34.6 million metric tons of wheat had been purchased by all types of enterprises, 4.5 mmt less than last year at the same time.

All six eligible provinces have been purchasing wheat at China's national minimum price of 2360 yuan per metric ton ($352 per metric ton). Shandong Province's procurement volume at the minimum price totaled 5.15 mmt as of July 20, 71 percent more than last year at the same time. However, in southern provinces hit by wet weather much of the wheat cannot meet the minimum price program's quality standard, so less wheat has been purchased at the national minimum price. Of the 2.5 million tons of wheat purchased in Jiangsu as of June 21, only 740,000 metric tons was purchased for the minimum purchase program.

On July 26, Anhui Province--one of the regions hit hard by heavy rain and floods--has launched a provincial-level "temporary reserve" buying program to procure wheat that fails to meet the national minimum price program's standard of less than 10-percent imperfect kernels. The temporary reserve will pay farmers 2200 yuan/metric ton for wheat with 10%-15% imperfect kernels and 2100 yuan/metric ton for wheat with 15% to 20% imperfect kernels.

The market price is currently 1500-to-1800 yuan per metric ton for substandard wheat with 10%-to-20% imperfect kernels. Officials are worried that Chinese farmers are incurring serious losses selling at these prices.

The Anhui Grain Bureau chief said, "Purchasing substandard wheat for the temporary reserve must push the market price upward."

Imported U.S. hard red wheat arriving in China is priced at roughly $208 per metric ton--about 1394 yuan per metric ton and much cheaper than the poor-quality wheat in Anhui.

The Anhui program will run from July 26 to August 31, 2016. The first batch of purchases is planned for 500,000 metric tons, and ultimately 1 million metric tons.

Anhui launched the first provincial-level temporary reserve program for substandard wheat in 2015, and purchased 216,000 metric tons. Obviously, this year's program is expected to be much bigger.

The provincial temporary reserve is a measure launched in response to new demands that provincial governments take more responsibility for implementing policies to "stabilize" local grain production and prices after the State Council's decree strengthening the "governors' grain responsibility system."

"State Council Leaders are very concerned" about trouble selling crops, according to a report on an inspection tour by the head of China's Agricultural Development Bank. The bank official visited Anhui, Jiangsu, and Henan Provinces and was satisfied that work was proceeding smoothly to quell farmers' losses from the poor quality of the wheat crop harvested this summer.