The polarizing policy of wheat market should be stable.

Editor's note: the 2016 wheat market has entered the second half. This year, the price of new wheat is low, the purchase and sale is not active, coupled with Henan, Anhui and other places wheat harvest season encountered overcast and rainy weather, the wheat market was not as expected. With the development of the minimum purchase price policy and the progress of wheat purchase and sale, the wheat market now reflects the characteristics of price differentiation. It is another year of wheat planting season, the Ministry of Agriculture wheat industry chain analysis and early warning team and our reporter bring readers the first line of information about the wheat city.

There is room for high-quality wheat prices to go up.

In order to understand the purchase and sale of wheat harvested in summer this year and grasp the price trend in the later period, the information early warning team of the whole wheat industry chain of the Ministry of Agriculture recently organized a special meeting.

Generally speaking, the price of new wheat is low and the purchase and sale is not active this year. Since July, with the strengthening of the minimum purchase price policy, the progress of wheat acquisition has been accelerated; it is expected that the market price trend will be obviously divided in the later stage, and the price of high-quality wheat will have room to go up; the parties in the meeting suggested that the policy of minimum purchase price for wheat in 2017 should be basically stable and should not be adjusted significantly.

Affected by the excessive precipitation during the harvest period, the quality of summer harvest wheat in southern China has generally declined this year, coupled with the weak market demand, the price of the new wheat opening scale is relatively low this year, and the market purchase and sale is not active. In early June, Hubei, Jiangsu, Anhui and Henan provinces comprehensively launched the lowest purchase price plan, but because a large number of low-quality wheat is difficult to meet the requirements for storage, and the continuous rainy weather in the south affects the progress of acquisition, the role of the lowest purchase price in "supporting the market" is limited. According to the monitoring of the Ministry of Agriculture, the average purchase price of wheat by state-owned grain enterprises in June was 115.49 yuan per 100 jin, down 2.7 percent from the same period last year, while the average purchase price of individual grain merchants was 104.10 yuan, down 7.7 percent from the same period last year. On June 30, Shandong and Hebei provinces launched the implementation plan for the minimum purchase price of wheat, and the progress of the acquisition of new wheat was gradually accelerated. As of August 20, various grain enterprises in the main producing areas had purchased a total of 61.58 million tons of wheat, an increase of 4.83 million tons over the same period last year. With the introduction of policies around the country to promote the acquisition of foreign wheat, the price of new wheat has risen steadily, and the month-on-month increase is gradually increasing. According to the monitoring of the Ministry of Agriculture, the average purchase price of state-owned grain enterprises in July was 115.43 yuan per 100 jin, basically the same as the previous month, down 2.9 percent from the same period last year, while the average purchase price of individual grain merchants was 104.69 yuan, up 0.6 percent from the previous month and down 8.2 percent from the same period last year. In the first three weeks of August, the average purchase price of state-owned grain enterprises was 115.82 yuan per 100 jin, up 0.3% from the previous month, down 2.4% from the same period last year, while the average purchase price of individual grain merchants was 105.58 yuan, up 0.8% from the previous month and down 8.1% from the same period last year.

Judging from the situation of the major producing provinces, the price increase of new wheat in Hebei Province and Shandong Province is the most obvious. Among them, the average purchase price per 100 jin of state-owned grain enterprises in Hebei Province rose from 114.92 yuan at the end of June to 117.33 yuan in late August, a cumulative increase of 2.1 percent, while the average purchase price of state-owned grain enterprises in Shandong Province rose from 115.19 yuan at the end of June to 116.35 yuan in late August, up 1.0 percent.

Due to the increase in the number of foreign wheat this year, the relative shortage of high-quality wheat supply, the effective supply of the whole market has declined, and it is expected that wheat prices will show a pattern of "high quality rising, poor quality weakening" in the later stage. After September, with the advent of the peak season of flour consumption, the preparation speed of flour enterprises will be accelerated, the operating rate will be increased, and the demand for raw materials will further increase. Under the circumstances that the purchase volume of the wheat market exceeds that of last year, the shortage of food sources in the high-quality wheat market may intensify, and there is still room for prices to rise. At the same time, with the continuous listing of new corn in Huang-Huai-Hai region of North China, it is more difficult for a large number of poor-quality wheat to enter the feed field, and the market price may continue to decline, so it is necessary to speed up the sales progress.

It is expected that after the purchase, the minimum purchase price policy in 2017 will be a key factor affecting the wheat market trend, especially in the context of this year's corn purchase and storage system reform, the market is paying more and more attention to the reform trend of the wheat minimum purchase price policy. Experts, cooperatives and business leaders participating in the meeting all hope that the policy on the minimum purchase price of wheat in 2017 should remain basically stable and should not be adjusted significantly. On the one hand, it is to protect the enthusiasm of farmers to grow grain. Due to the decline in the quality, per unit yield and price of new wheat this year, the decline in farmers' planting income, and the serious losses of many large-scale households, and even the phenomenon of withdrawing rents, if we lower the minimum purchase price next year, it will seriously deal a blow to farmers' enthusiasm for growing grain. The average net income per mu of farmers in the base county of Henan wheat cost survey was 283.21 yuan, down 16.79% from the previous year, and has declined for two consecutive years. In Anhui Province, the average net income per mu of ordinary growers (less than 100mu), medium growers (100Mu 500mu) and large growers (more than 500mu) were 143.48 yuan,-260.22 yuan and-309.99 yuan, respectively. According to the preliminary survey of the autumn and winter planting intention of the agricultural department of Jiangsu Province, 42% of the farmers said that they would keep the wheat area stable next year, 51% of the farmers would reduce the area, 7% said they would no longer grow, and none of the surveyed farmers said they wanted to increase the area of wheat. On the other hand, it is to protect the interests of the downstream of the industrial chain. The processing enterprises reported that at present, farmers in the main producing areas do not store grain, and most of the wheat is sold directly after harvest, and the processing enterprises do not have sufficient funds and warehouse capacity to achieve all acquisitions, and if there are no policy purchasing subjects such as grain storage, it may be difficult for farmers to sell grain, and processing enterprises also lack a stable supply of grain. Therefore, it is hoped that the state can retain the policy of minimum wheat purchase price, and the price should also be basically stable. The focus of policy reform is to promote the structural reform of wheat supply side by improving the mechanism of purchasing and selling and promoting the convergence of production and marketing. If it is really necessary to reduce the price level next year, the range should not be too large, and the subsidy policy for farmers must keep up. In addition, the minimum purchase price policy should be announced as soon as possible to send a positive market signal to avoid a "cliff" fall in wheat prices after the end of last year's buyout.

Cao Hui Li Songlin, Chief analyst of Wheat Industry chain of the Ministry of Agriculture

(Cao Hui is an expert from the Agricultural Research Center of the Ministry of Agriculture, Li Song, an expert from the Information Center of the Ministry of Agriculture.)