How to deduce the pattern of Chinese Wheat under the "three High"

According to the State Grain Administration, as of 31 August, grain enterprises of various types in 11 major wheat producing areas, including Henan and Shandong, had purchased a total of 69.84 million tons of new wheat, an increase of 20.5 million tons over the same period last year. So far, China's wheat presents a three-high pattern of "high price, high purchase quantity and high stock quantity".

In the last five years of wheat acquisitions, there was a year-on-year decrease in 2010 and 2013 and an increase in 2011, 2012 and 2014, of which 41.5% increased in 2014.

The primary reason for the rapid increase of wheat purchase in China is that the minimum purchase price of grain in China exceeds the market price year by year, which promotes the flow of grain sources to policy-based purchasing enterprises.

Since 2004, China has adopted the policy of protecting farmers' enthusiasm for grain production and implementing the policy of minimum purchase price in the main grain producing areas. Since 2008, the minimum purchase price of wheat has been raised year by year. By 2014, the minimum purchase price of wheat was raised to 1.18 yuan per jin, which was 0.72 yuan for white wheat, 0.69 yuan for red wheat and 0.69 yuan for mixed wheat per jin in 2006 (the minimum purchase price for wheat was not implemented in 2004 and 2005), an increase of 63.9% and 71% respectively.

Before the new wheat came on the market this year, the market price of wheat in Xiangyang City, Hubei Province, the earliest area in southern China, was 1.10 yuan. As the market price is lower than the minimum purchase price, Hubei Province took the lead in launching the implementation plan of the minimum purchase price of wheat in the country on May 27. Since then, the implementation plan of the minimum purchase price of wheat has been fully launched in the main wheat producing areas. It has been learned from the Hubei Provincial Grain Bureau that as of August 29, various grain management enterprises in the province had purchased a total of 7.13 billion jin of new wheat, an increase of 35.8% over the same period last year.

While the domestic wheat market price is lower than the minimum purchase price, the wheat market price in the international market is also much lower than the domestic market price.

Before the new wheat came on the market, the price of American wheat dropped sharply at the port of our country. On 8 May, the price of US No. 2 soft red winter wheat delivered to China's port in July was 2558 yuan per ton, which dropped to 2263 yuan on 23 May. It fell to 2065 yuan on 24 June, 1982 yuan on July 2, and 1882 yuan on July 14, the lowest this year.

Under the profitable situation, the entry of foreign wheat into the Chinese market has accelerated this year. In the first seven months of this year, China imported 2671456 tons of wheat, an increase of 56.61 percent over the same period last year.

As the main body of implementing the minimum purchase price of wheat, the purchase volume of stored grain wheat reached a new high in the middle of this year. As of August 25, China Grain Reserve had purchased 25.34 million tons of wheat in the market, three times that of the same period last year.

The China Grain Storage system, which bought nearly 90 million tons of grain in 2013, is extremely tight at a time when summer grain purchases have soared this year and autumn grain is about to be put on the market.

In order to vacate the warehouse, China Grain Reserve has stepped up policy grain auctions since mid-May. By mid-August, a total of 29.98 million tons of policy grain had been traded in three months. China Grain Reserve said that the target of selling 32 million tons by the end of October was expected to be completed ahead of schedule.

In order to make way for new grain, the storage of grain did not hesitate to spend money. Despite the upside-down prices of production and sales and the widening price gap between new and old, from January to July this year, the central grain reserves rotated the central grain reserves, resulting in a loss of 560 million yuan. By the end of July, the rotation of old grain had been completed by 61%, and the rotation of new grain by 43%, which was faster than in previous years.

Although the minimum purchase price of wheat in China has been mentioned again and again, farmers' planting of wheat has not reached the expected area. During the six years from 2009 to 2014, the planting area of winter wheat, which accounts for about 85% of the total wheat planting area in China, has been declining. From 0.36% year-on-year growth in 2009 to-0.1% in 2014.

An important reason for the decline in wheat acreage year after year is that farmers do not fully benefit from the minimum purchase price policy.

Although the state raises the minimum purchase price of grain every year, the prices of means of production and labor costs are also rising.

The minimum purchase price refers to the price at which farmers sell grain to the grain storage points designated by the state. China's farmers live scattered, the area is large, and the designated grain storage sites are limited, coupled with the grain purchase season is the busy season in rural areas, many farmers sell grain on their doorstep, a few cents per jin.

According to the local situation, the income from planting wheat is very limited. Next, we take Henan Province, which accounts for 1/4 of China's wheat output, and Anhui Province in the south as examples to analyze and illustrate.

On July 22nd, the local economic and social investigation team of Henan Province released a survey on the wheat production cost of 600 farmers in 120 townships (towns) in 40 counties (cities and districts). The results show that the production cost of wheat per mu this year is 583.7 yuan, which is basically the same as that of last year's 580.5 yuan. Of this total, the cost of materials was 238.6 yuan, down 3.1 percent from the previous year; the expenditure on production and services was 155.5 yuan, an increase of 4.9 percent over the previous year; and the labor cost was 189.6 yuan, an increase of 1.9 percent over the previous year.

This year, the average wheat yield per mu in the province was 410.5 kg, an increase of 9.7kg over the previous year and 2.4% over the same period last year. Farmers' income per mu of wheat was 431.1 yuan, an increase of 67.8 yuan over the previous year, an increase of 18.7 percent over the same period last year, the highest increase since 2010.