China's grain inventory is the highest in the world.

The price of corn has dropped. The purchase price of national temporary storage corn listed in 2015 (national standard third-class quality standard, the same below) is 1 yuan / jin.

Last year, the price was more than 1.11 yuan per jin, and the prices varied slightly in different places, including 1.13 yuan per jin in Inner Mongolia and Liaoning, 1.12 yuan per jin in Jilin and 1.11 yuan per catty in Heilongjiang.

As a result, corn prices have fallen by about 10 per cent. Why did the authorities slash the purchase price of corn?

The inventory is so high that there is no room for it. There is also an important reason, corn prices do not fall, corn processing enterprises can no longer play, can only close down.

The grain stock ranks first in the world

First of all, the first reason is that China's grain stock is the largest in the world, high above, unmatched by other countries.

The end-of-term inventory of corn in China is expected to be 90.61 million tons in the market year of 2015. Since 2011, the inventory of corn in China has increased year by year, sometimes by nearly 10 million tons a year.

Let's take a look at wheat. In the 16th market year in 2015, the end-of-period inventory is expected to be 89.57 million tons, which is also a substantial increase.

The end-of-term inventory of rice in the 2015 market is expected to be 45.6 million tons, which is slightly lower and remains high.

China's corn, wheat and rice stocks add up to about 230 million tons, ranking first in the world.

There is another country in the world that also likes to store grain, India, but compared with China, it is far behind. For wheat, India's stock at the end of the 16th market in 2015 is only 11.9 million tons, while China's is 89.57 million tons, far behind.

Is it necessary for China to build up so many grain stocks?

For more than 30 years of domestic reform and opening up, apart from border conflicts, no major wars have been fought. Natural disasters, except for the Yangtze River flood in the 1990s, the subsequent SARS and Wenchuan earthquake, are basically peaceful and tranquil, with a high level of grain stocks of 230 million tons, which is really inexplicable.

The real reason is that the authorities want to ensure the income of farmers and stabilize agricultural production. Rice and wheat are purchased at the lowest price, corn is purchased temporarily, and the official purchase price goes up again and again, and farmers do get real benefits, but it is also difficult to sustain and at stake.

With so much grain to be stored, the storage capacity is a big problem. The temporary collection and storage of corn this year has increased AVIC. AVIC not only develops aircraft, but also has grain trade, so it has grain warehouses. what the authorities lack most now is storage capacity, which allows AVIC to enter the temporary storage of corn.

How nervous is the position? The State Grain Administration has used two unprecedented "at present, China's grain inventory has reached a new high, the amount of grain stored by all kinds of grain and oil storage enterprises is unprecedented, and the amount of national policy grain stored in open-air and simple storage facilities is also unprecedented."

The grain processing industry can't survive.

In the past 10 years, the official purchase price of grain has risen sharply as a whole, farmers are very happy, and the grain processing industry is not happy. The price of grain has risen, and the cost of the processing industry has increased, but the market price of grain processing products has gone with the market and cannot rise, or the increase can not keep up with the increase of raw grain, a large area loss in rice processing and a large area loss in corn deep processing. Such a sound will appear in society.

Just look at Cofco, China's largest local grain processing company.

In 2012, 2013, 2014 and January-March 2015, Cofco's gross profit margins for agricultural trade, processing, futures, logistics and related businesses such as grain, oil and sugar, which are the main sources of income, were 6.96%, 6.56%, 3.89% and 4.50%, respectively. Profit margins have declined all the way. Without huge government subsidies, it is hard to say how much profit Cofco will make and whether it will make profits or not.

Cofco's rice processing has been losing money for many years, and Cofco biochemical (000930.SZ), which is engaged in deep processing of corn, is expected to lose 4.7-530 million yuan in the first three quarters of this year.

For officials, the upstream grain planting is the left hand, the downstream grain processing is the right hand, neither side can be abandoned, both hands must be hard, the body can be comfortable.

Agricultural products are an ecological circle, the processing industry does not make money, a lot of losses, can not promote the development of the upstream planting industry, and finally only the official burden is left, "alone" can not play with the ecological circle, and it is inevitable that it will all come to an end.

The newly released "some opinions of the CPC Central Committee and the State Council on promoting the Reform of the Price Mechanism" puts forward that we should make overall use of both international and domestic markets, pay attention to the role of the market in forming prices, and the prices of agricultural products are mainly determined by the market.

The market mechanism is the basis of the long-term sustainable virtuous cycle of the agricultural ecosphere. Now that corn prices have fallen sharply, some analysts say that farmers have lost hundreds of billions of dollars, which is very ashamed, but then again, agricultural products also have to talk about the market economy, and there is no sure profit without loss. Continue to let the price of Chinese agricultural products out of the market, the price is much higher than the international market, even China with deep financial resources can not bear it.