Thursday, December 5, 2013

Rice Prices Fall Despite Support Program

Prices for japonica rice in Jiangsu Province are falling despite the fact that officials have begun price support purchases for this crop, another reflection of China's grain glut.

A large-scale rice grower named Xue Lianchun was happy to sell his rice at 148 yuan/50kg, slightly below the support price of 150 yuan. He was happy because he anticipates that prices are about to fall further. Xue wasn't able to sell at the support price because moisture levels in his rice exceeded the standards. He felt fortunate to get close to the support price for his soggy rice. He says the price has already fallen to 146 yuan.

The boss of a local rice mill in Jiangsu says the price of rice has been falling for about 10 days. He attributes it the government's subsidy to transport rice out of the northeast. Companies are now getting a subsidy to buy rice from northeastern provinces and ship it to Shanghai or other places, but there is no such subsidy for rice from Jiangsu. The influx of rice in the south is pushing prices downward.

Jiangsu has launched price-support purchases of rice for the first time in the province since the program was introduced ten years ago. An official explained why rice prices can be below the minimum floor price. Rice that doesn't meet the standards can be sold at the minimum price. The minimum price is intended to guide prices in a certain direction--it doesn't mean that all rice can be sold at that price. He explains that only a small part of the province's rice will be purchased at the minimum price.

The grain official also attributes the decline in Jiangsu rice prices to the southward shipping of rice motivated by the subsidy and, more broadly, to the large harvest of rice and inventories that are already ample. Imported rice is also putting downward pressure on rice prices. With these influences, Jiangsu rice mills are not eager to buy and they are offering lower prices.

By the end of November, only a third of Jiangsu's rice had been purchased. Authorities have instructed the Agricultural Development Bank to make loans available to make sure farmers don't get paid with IOUs.

No comments: