By Xu Xiaoqing, Li Qing & Wu Zhenjun, Task Force on "Policy Research on the Supply and Demand Changes of the Main Agricultural Product, Cost Price Changes and Market Regulations", Research Department of Rural Economy of DRC
Research Report No.180, 2011
The northeast region is China's major grain production area and its most important area for commodity grain production. Grain output there has been rising since 2004, driving up its proportion in the national total. In 2010, the province of Heilongjiang saw its commodity grain rate rising to 80%, its commodity grain output reaching 80 billion jin (two jin make one kilo), and its per capita grain possession being 2,617 jin. A total of 55 billion jin of grain was transported out of the province. In the same year, the province of Jilin posted a commodity grain rate of 81%, a commodity grain output of 48 billion jin, and a per capita grain possession of 2,070 jin. A total of 26.5 billion jin of grain was transported out of the province. The two provinces played vital roles in ensuring national food security and stabilizing grain demand and supply. In order to have a better understanding of the new circumstances and new problems regarding the grain production and circulation in the region this autumn, the authors made a field survey in the two provinces in mid-August this year.
I. Basic Facts about Grain Production, Marketing and Processing
1. Rice production and marketing
(1) The rapid increase of round-grained nonglutinous rice (japonica rice) has turned the two provinces into China's most important producer of this grain. China fully liberalized grain purchase and price after 2004. It introduced many policy measures, such as setting floor prices for grain purchase, allowing temporary purchase and storage, offering subsidy for grain production and rewarding major grain-producing counties. Accordingly, the floor price for this rice has been raised several times, subsidy has been increased annually, and subsidy has been offered for the temporary purchase and storage and southward transport of the region's rice. These policy measures have greatly mobilized the initiative of the producing areas and especially the farmers to grow rice. While sown area has expanded, rice output has increased rapidly. In 2009, the region accounted for 44.7% of the country's total rice-growing area and 43.1% of the country's total rice output. Since 2004, the three provinces in the northeast have accounted for more than 80% of the country's rice output growth. In particular, the province of Heilongjiang has claimed a 53% share of this growth.
(2) Expanded sown area and higher unit output are the main factors contributing to rice output growth. During the 2004~2010 period, the province of Heilongjiang saw its rice-growing area expanding by 26.385 million mu (15 mu make one hectare). And in 2011, the province's total grain-growing area rose to 206.5 million mu, with 51.51 million mu for rice. In terms of unit output change, the rice output per mu in Heilongjiang reclamation area has been rising 10.5 kilograms per mu on average annually since 2004 thanks to increased infrastructure inputs (mainly farmland and irrigation improvement and greenhouse seedling cultivation) and variety improvement. Currently, the average unit output is 423 kilograms for the whole province and 550~600 kilograms for the Reclamation Area. The unit output of high-yield varieties has reached 700~800 kilograms per mu.
(3) The northeast region has become growingly important in China's rice supply. Currently, China's total rice consumption is steadily rising. In particular, the consumption of round-grained nonglutinous rice is even faster. Therefore, the rice dependence on this region has become higher and higher. The state has offered transport subsidy for several consecutive years for transporting this rice out of the region, which has helped the region's rice to enter markets in the southern part of the country. At present, this region's rice is consumed in 28 provincial administrative provinces (autonomous regions, municipalities). Besides, rice sales have gone up sharply from 3.4 billion jin in 1993 to 29.3 billion jin in 2009, and peaked at 36.5 billion jin in 2004. The southeast coastal areas and the west region have been receiving increasingly more rice from the northeast region.
In addition, the growth of the demand for round-grained nonglutinous rice has outpaced the growth of the supply of this rice in recent years, thus gradually reducing its inventory. The inventory reduction has been all more conspicuous for state-owned grain enterprises. Over the past two years, grain enterprises, processing enterprises and other market players have been more enthusiastic about rice purchase and as a result the purchase by state-owned grain enterprises has been on the decline. At the same time, farmers are no longer eager to sell grain for cash, due to their income increase and higher market awareness. They have become more inclined to keep grain for better prices, and they are more capable of doing so now.
2. Corn production and processing
(1) Corn output has risen sharply and corn production has been excellent. In 2010, the corn output in Heilongjiang reached a record high of 23.245 million tons, up 21.1% year on year and three times that in 2000. The corn output in Jilin bounced back to the 2008 level, reaching 20.88 million tons. This was 15.4% higher than in the previous year and 2.1 times that in 2000.
Corn production this year is highly hopeful on the whole. Field survey indicates that first, weather has been largely good in most corn-producing areas, except for about 650,000 mu in Jilin (accounting for about 1.2% of the province's corn-growing area). Second, the stand of seedlings has been high. In the province of Jilin, the rate reaches 95.3%, which is 1 percentage point higher than in the 11th Five-Year Plan period. Third, the growth of the crop has been excellent. The difference is small between different varieties, different plots and different regions. Based on the conservative estimate of 500 kilograms per mu, the expanded corn-growing area in Heilongjiang and Jilin can increase corn output by about 6 million tons. Currently, the North China region and the Huanghai region have same corn-growing area and their corn output will be largely at the same level of last year. It is expected that corn output will exceed 180 million tons this year, up more than 3% year on year.
(2) Farmers are enthusiastic about corn growing. In recent years, both corn-growing acreage and corn output in the provinces of Heilongjiang and Jilin have continued to rise. With the introduction of some cold-resistant varieties, some high-latitude areas formerly unsuitable for corn growing have begun to grow corn this year. And as corn growing can generate visibly higher earnings than soybean growing, the corn-growing acreage in Heilongjiang has reached 74.526 million mu with an increase of 9 million mu. This is 13.7% higher than in the previous year, or 175.8% higher than in 2000. In the province of Jilin, farmers have grown corn even in some sloppy land, grassland, forest land and marginal land. Accordingly, the province's corn-growing area has reached 54.292 million mu with an increase of 3.082 million mu. This is up 6% over last year and 64.7% over 2000.
(3) Higher price is the main factor contributing to increased corn growing. In recent years, corn price has continued to rise. At the Chicago Board of Trade (CBOT), the price of corn futures rose 60% over the past year. The average producer price has continued to rise since the beginning of 2011, from 1,850 yuan per ton to 2,200 yuan per ton. As the corn price on the international market has been rising and as the domestic market demand has been strong, corn price has been hiking sharply this year. In Heilongjiang, the producer price has hiked from 1.66 yuan per kilogram to the current 2.02 yuan per kilogram, up 21.7%. Our field survey indicates that the purchasing price of corn produced in the northeast region has been rising visibly since last year and remains steadily at a high level. In 2009, the purchasing price in Heilongjiang stood at about 1.5 yuan per kilogram and rose to 1.65 yuan per kilogram in May and June. In 2010, the purchasing price stood at about 1.8 yuan per kilogram and hiked to 2 yuan per kilogram in May and June. In the province of Jilin, the purchasing price this year ranged between 2,100~2,200 yuan per ton (with standard moisture), up 17% year on year. The continuous rise in corn price has widened the income gap compared with soybean growing. Farmers have actively adjusted the structure of crop growing and are more enthusiastic about corn growing.
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