Local officials have been ordered to buy up large volumes of Chinese substandard wheat harvested this summer. A July 20 document on wheat procurement work in "disaster areas" said large volumes of wheat produced this year do not meet national standards due to lodging, germination, sprouting, and mold caused by heavy winds and rain at harvest time in regions of the middle and lower Yangtze River valley and the Huang-Huai region.
The document issued by the National Development and Reform Commission and eight other government organizations and companies orders local governments, grain depots, mills, and banks to buy up the substandard wheat and finance purchases to ensure that farmers are able to sell their off-grade wheat. Insurance companies are ordered to pay out contractually obligated indemnities to farmers and inspections of insurance companies are to be conducted. Agricultural Development Bank managers are ordered to simplify and speed up approvals for loans. Officials are warned to have a sense of responsibility and urgency and to prioritize wheat-buying as a political task in order to preserve social stability. The document says farmers are very concerned.
The National Bureau of Statistics report on summer grain output said winter wheat production totaled 128.35 million metric tons, down 2.2% from last year. The Statistics Bureau report did not mention quality problems and described the harvest as "relatively good." But the large amounts of substandard wheat will reduce the actual supply of milling-quality wheat more than statistics indicate.
State-owned companies are urged to go into the market to buy up wheat and downstream processors can be given awards to stock up on wheat inventories. (State-owned companies Sinograin, COFCO, China Supply and Marketing Group, and Sinochem are among the issuers of the document.) This year's revised program for minimum price purchases of wheat and rice urges provincial authorities to organize "temporary reserve" purchases of off-grade wheat when large volumes do not meet the standard of grade 3 or higher for national minimum price procurement.
Anhui Province launched a purchase program for off-grade wheat last week. Hubei Province launched a program June 8. A district in Hubei is paying 1600-1900 yuan per metric ton for wheat with excessive mold. One district of Anhui says 50 million yuan of insurance indemnities have been paid out to 340,000 farmers whose wheat was damaged by frost, storms, and pests.
According to the document, funds for programs to buy up substandard wheat can come from the provincial "grain risk fund." If additional funds are needed, they should be included in the provincial budget.
At the same time, the document cautions the same officials to ensure food safety by preventing moldy wheat from contaminating the food supply with mycotoxins.
Wheat buyers are warned not to limit purchases of qualified wheat, nor to downgrade wheat, withhold payment, to issue IOUs, or exaggerate prices paid. They are warned not to steal subsidy funds and not to cheat farmers or charge them high interest rates. Wheat-buying officials are admonished to keep reserve wheat separate from wheat purchased at market prices and to prevent damp wheat, off-grade wheat, and foreign material from mixing with reserves.