context: The latest food security concern comes via a decline in the state purchases of the summer wheat harvest. Government purchasers were outbid by private buyers willing to offer prices higher than the minimum purchasing prices (MPPs). Wheat prices may further rise as farmers are hoarding grain for better profits.
State procurement of wheat in major producing areas totalled 42.9 million tonnes from June to 5 August, a drop of about 9.4 million tonnes y-o-y, per the State Grain and Reserve Administration.
Instead of being an augury of a wheat shortage, this demonstrates the greater role played by private traders in grain purchases, comments Hu Bingchuan 胡冰川 Chinese Academy of Social Sciences Rural Development Institute researcher.
Wheat is feeling the spillover effects of soaring corn prices, which reached a five-year high on 31 July and forced producers to switch to wheat as an alternative feed. The well-performing open market resulted in higher wheat prices than the protective MPPs. According to Sublime China Information, an online commodity pricing platform, level I wheat prices offered by flour companies were between C¥2.4 and C¥2.8 per kilogram, compared with the MPP of C¥2.32 per kg.
Grain shortage is overrated at this stage, says Huang Jikun 黄季焜 Peking University Centre for Chinese Agricultural Policy director. The fundamental challenge to grain supply lies in feedstuff shortages, while in the short term, given the huge amount of rice and wheat annual outputs, the most urgent issue remains cutting national grain reserves to a 'scientific level'. The per capita demand for staples has been decreasing over a number of years, whereas consumption of high-quality rice and special-purpose wheat is growing. The trend shows the direction for adjusting the planting structure, says Huang, suggesting
- replacing the current MPP mechanism with rice and wheat producers' income subsidies
- encourage producing high-quality products with higher prices