Minimum Price Program Tweaked

China announced a modest reform of its minimum price purchase program for wheat and rice that Farmers Daily described as a signal of marketized reform.

This year's implementation plan for the program sets stricter conditions for activating minimum price procurement of wheat and rice. Minimum price procurement can begin only when the market price has fallen below the minimum price announced by the government for 3 days in a row. When this happens, the province's branch of Sinograin applies to its headquarters, which in turn seeks approval from the State Administration of Grain and Commodity Reserves to begin minimum price procurement. Minimum price procurement must be suspended when the market price rises above the minimum for 3 days.

The document allows only grain of national grade 3 or higher to be purchased at minimum prices. When there are large volumes of grain below grade 3 due to a disaster or other reason, provincial authorities are urged to begin their own "temporary reserve" purchases of grain.

The minimum price procurement for wheat can start June 1 (about a week later than in previous years) and ends by September 30. Early indica rice minimum price procurement season is August 1 to September 30. Middle and late indica rice procurement can begin October 10 and finishes by January 31. Japonica rice procurement can begin November 1 and finishes by the end of February. The national program covers the same provinces as in past years: 6 wheat provinces, 5 early rice provinces, 8 middle and late indica rice provinces, and 4 northeastern japonica rice provinces. Other provinces can launch their own procurement at minimum prices at their discretion.

This year's program is more specific about the roles of various actors. Sinograin is commissioned as the main actor in procuring rice and wheat at minimum prices. This year's document specifically identifies four state-owned companies that can purchase grain on Sinograin's behalf: COFCO, Supply and Marketing Group, Sinochem, and China State Farm Group. Sinograin can appoint other entities to purchase grain if they meet requirements for capital, assets, credit, etc.

This year the Peoples Bank of China and the Banking and Insurance Regulatory Commission are added as issuers of the document. The Agricultural Development Bank is identified as supplier of credit for the program.

The document's preamble identifies its main purpose as protecting the profits of farmers. Other language suggests that the reforms are aimed at stopping abuses of the program by local depot operators. The document calls for ensuring that quantities purchased are "truthful." Orders issued at summer grain procurement meetings warn officials not to "round trip" grain by buying and selling the same grain multiple times and they were sternly ordered not to use reserve grain as a guarantee for any other loans. There were also admonitions to prevent poor quality grain from mixing with food grains to prevent food safety threats.

Officials at the national summer grain meeting convened on May 17 anticipated that the volume of grain purchased at minimum prices will be smaller this year and prices will better reflect quality premiums.

However, a report on progress of the wheat harvest says there are serious quality problems with this year's winter wheat crop. Heavy rains during the recent harvest has caused lodging, sprouting, and mold problems in many areas. Prices are said to be lower than at this time last year.

At meetings to organize summer grain procurement officials were admonished to give proper attention to grain procurement to protect the interests of farmers and to maintain social stability. Local meetings reported training dozens of officials; counted up scales, grain driers, and other equipment on-hand; and ensured adequate credit is available from Agricultural Development Banks to buy grain.