Hoarding grain with Chinese characteristics

An article entitled, "Main characteristics of our country’s new-style grain reserve system," seems to be aimed at assuring the Chinese citizenry that plenty of grain is on hand and the government is wasting much less money on storing it than in past years.

The article says China must have "grain reserves with Chinese characteristics": massive grain reserves that are getting even bigger, stored in bins all over the country, and owned by the government. The article tells us that China needs these massive grain inventories because it has a big population, is in the midst of rapid industrialization and urbanization and because of the small-scale pattern of grain production. Reserves are needed to guarantee food security and intervene in the market to stabilize prices.

Reserves are held by two levels of government: central and local. The central grain reserves are used to make interregional adjustments in grain markets under the State Council's instructions to central grain reserve companies. The local reserves of grain are for adjusting local grain markets according to the local governments’ responsibilities for grain management and maintain local food security. Local reserves are managed mainly by the province. Some regions also keep prefectural or county reserves, but most are managed at the provincial level. "Up to the present, each region has increased grain and oil reserves and improved management according to the requirements of the provincial governors’ responsibility system."

The article emphasizes the "marketization" of grain reserves. Instead of the former state-owned grain bureau system, now there is a company called Sinograin and other designated grain enterprises that carry out grain reserve business and storage under orders and with subsidies from the government. The article says, "In the last few years, grain processing enterprises gradually became the main holders of grain reserves as effects of reform came into play."

Grain can be purchased directly from farmers or through middlemen. Some regions use fixed purchase orders (ding dan) to solve farmers’ difficulty selling grain by providing a stable marketing channel, reduce distribution distribution costs and increase profits in distribution channels.

The main channel for selling reserve grain is through open auction sales in wholesale markets. The second is through negotiated sale to traders or processing enterprises to sell regularly rotated grain. A third channel that is not used so often is to sell processed grain directly to retailers or consumer-oriented companies. The article doesn't mention that much of the grain offered for auction doesn't sell because the opening price is set too high.

The central government established a marketing rotation system in the last few years that rotates one-third of grain each year to maintain the quantity and quality of grain at a reliable level.

Grain reserve infrastructure has improved a lot. Grain is mostly held in modern storage facilities. The quantity and quality of grain reserves is maintained by technology. Since 1998, central government has allocated funding to construct modern grain warehouses, most of which are now in use. Presently, grain storage facilities hardware is up to international standards.

In the last few years, grain storage checks have shown reserves are in line with reported amounts, quality is at its highest level, enterprises management and worker quality have improved. The quality compliance rate of central reserves is 100%, at 97% of advised rate {?}, low-temperature storage has reached 50%. Some biological methods are used in hot regions of the south, chemicals reduced, fumigated, to give the market a safe, quality, “green” grain supply.

Losses from holding grain reserves have been reduced. Now the cost of holding reserves is directly related to how much grain is held through a financial contract system. Sinograin gets a set subsidy for actual grain and oil reserves and for rotation business. By strengthening management and reducing costs, funds are used more efficiently and the problem of losses from grain enterprises has been changed.