Making Grain Bank as Good Housekeeper for Farmers

Editor's note

It is the grains rather than the money that are deposited in the “banks”. What is recorded in the "passbook" is not the amount of money, but the amount of grains. This is the "grain banks". From the storage of grains for the farmers, to the unified purchase, drying and storage of grains, and to adding value, the meaning and functions of the "grain bank" have been continuously expanded. However, problems have gradually been shown, such as excessive reliance on market, single services, lack of funds, and insufficient support from upstream and downstream industries. The "grain banks" have experienced a crisis of survival. Therefore, there is an urgent need for China’s government to provide support in financial loans, break through bottlenecks hindering grain circulation, resolve information asymmetry, accelerate industrial cooperation, strengthen legal aid to ensure the healthy development of "grain banks" and provide more services to the farmers.

 Talking about grains, farmers felt melancholy.

Zhu Yuancheng, a 43-year-old corn farmer looked at 225 mu of luxuriant corn fields remotely, wondering what the corn sales price would be that year. He said: "In the past, when corn was sent to the 'grain banks', the price rose, and it was easy to maintain and increase its value. However, in 2016, the price of corn fell and we were unclear whether the grain price would increase or drop. In this case, no one dared to put grains into the 'grain banks'."

In the Youyi Farm of the Hongxinglong Administration Bureau for Agricultural Reclamation in Heilongjiang Province, China, many large-scale grain farmers had similar concerns.

Lv Hongjun, the legal person of the "grain bank" in the eighth management zone of Youyi Farm, had mixed feelings. He said that grain farmers did not want to take risks and signed the contracts only for maintaining and increasing the value, so the risks were undertaken by the enterprises. The enterprises were unable to bear so many risks. Especially in the case of a downward corn market, the development of the "grain bank" was frustrated, which also adversely affected the agricultural industrialization.

What role could "grain banks" play in agriculture? How about its business operation? What problems did the agricultural sector meet and what support was needed? With doubts, the reporter walked into Hongxinglong's "grain bank".

The warehouses with drying abilities ensured the safety and brought benefits- not only to ensure food safety, but also to keep and increase the value of grains.

In 2017, the Youyi Farm signed a 12,000 mu of green A-level Daohuaxiang rice planting contract with Saifuruisi Rice Co., Ltd., a company with the functions of “grain banking, drying, storage, processing and trading”. The contract stipulated that the standard purchase price was RMB 2,000 yuan for 1,060 jin of grains (1 jin = 0.5 kg) in every mu of field (1 mu = 0.067 ha) and the amount of grains exceeding 1,200 jin was purchased at the market price. Ma Guoqiang, a major grain farmer in China, signed a 3,000 mu planting contract with a guaranteed minimum sales volume of RMB 6 million yuan.

Hongxinglong Administration Bureau, which owned nearly 7.3 million mu of arable land and a grain production capacity of over 8 billion, encouraged the development of "grain banks" in the forms of cooperatives, partnerships, joint-stock cooperatives, and stock-holding systems under the support of the national agricultural policy. The difficulties in grain drying, storage, value preservation and circulation were resolved. A total of 23 "grain banks" were established, a total of 56 sets of grain drying equipment were purchased, and the storage capacity exceeded 4.3 billion jin.

The continuous rainy weather of the previous two years had extremely adverse effects on the grain harvest. The drying equipment of the "grain bank" ran 24 hours a day, and the warehouses were all available so as to ensure that 100% of the grains were put into storage on time, and there were no rice germination or grain mildew. Hence, the safety of food production was therefore ensured.

The "grain banks" not only ensured the safety of food production, but also played a role in maintaining and increasing value of grains. According to Zhan Haibo, the Head of the Grain Section of Shuangyashan Farm, three "grain banks" were formed in the form of cooperative with a storage capacity of 120 million jin. In the autumn of 2014, it not only solved 46% of the grain drying and storage, but also ensured that the farmers' grain value was increased by RMB 0.01-0.02 yuan per jin. According to Lian Donghai, a corn farmer in the sixth management zone, “In the autumn of 2014, the rain was too heavy, and the moisture content of harvested corn reached at least 70%. When piled in the yard, corn would go mildew. All the corn of more than 500 mu of land was sent to Zhongxin Grain Bank”. Grains were well kept. When they were sold in the coming year, the price was increased by RMB 0.02 yuan per jin."

According to Li Qiang, the Head of grain management at Hongxinglong Administration Bureau, the rise of the "grain banks" solved the problems of grade and price fraud, broadened grain sales channels, opened up markets in Shandong, Jiangsu, Shanxi and other provinces, and increased at least more than RMB 60 million yuan of grain value.

The cooperation between agriculture and industries created a big market- "enterprises + grain farmers" eased financing difficulties and created new business forms.

Guangliang Rice Industry Co., Ltd. in Jiangchuan Farm and rice farmers cooperated together to establish Guangliang Organic Rice Production Cooperative, and built an 80,000 mu of organic rice production base in the form of a "grain bank". "Jiangchuan" brand rice was rated as a well-known trademark in Heilongjiang Province and was sold directly to Guangzhou and even to Hong Kong. The increased annual income per mu rice was RMB 320 yuan. According to Li Guofeng, the director of the farm, seven rice processing enterprises in the farm established "grain banks"- a total of 920 million jin of paddies were processed and transformed annually, and more than 100 sales points were set up across China.

The rise of "grain banks" provided support for the development of the grain processing industry and accelerated the industrialization. Hongsheng Grain Storage Company in the 597 Farm took advantage of 4 driers with the capacity of drying 3,000 tons of grains per day, attracted 14,000 farmers to establish the "Hongfeng Grain Bank" in the form of a cooperative, and provided value-maintaining and value-added services for 1 million mu of farmland. The “grain banks” guaranteed profits of farmers and sped up the development of storage companies. 

Furthermore, Hongsheng Grain Storage Company set up 63 trade supervision warehouses with a total storage capacity of 3 billion jin and became the largest private grain storage enterprise in China with the largest single warehouse capacity. Provincial-level leading enterprises obtained independent trading rights, established a river-and-sea continuous transport model, and formed a one-stop grain logistics chain of purchase, storage, processing, transportation and sales.

Fu Shengjun, legal person of "Fengda Grain Bank" in Shuangyashan Farm, said: "The “grain bank” has solved the shortage of funds. The farmers generally deposit grains for nearly half a year. Therefore, we develop the wine industry and the pig farming industry." He organized 9 households to invest RMB 1.2 million yuan to establish a professional corn planting cooperative and set up a "grain bank" to solve financing difficulties. Through the development of wine making, "Laofujia Wine Shop" became a famous brand in Shuangyashan City, with an annual sales volume of more than 80,000 jin.

Hongxinglong Administration Bureau relied on the "grain banks" to make mid-to-high-end rice popular in the market. The sales price of selenium-rich rice from Shuguang Farm and the glucan healthy rice from 291 Farm could be more than RMB 10 yuan per jin, that of "Yakehe Spring " organic rice from Hongqiling Farm could be RMB 18 yuan per jin, and the price of high calcium rice from 853 Farm could reach even RMB 50 yuan per jin.

The problems required strong services-four reasons" caused "grain banks" to need "supports from five aspects urgently."

However, after years of development, the "grain bank" gradually revealed some problems.

In Shuangyashan Farm, Sun Xianjun, the legal person of the "Yi’nong Grain Bank", looked helpless. He said that in 2016, as the corn market declined, farmers could feel upset and sell grains in the fields immediately. Few farmers went to the "grain banks" to maintain the grain value. As a result, his "grain bank" also lost its value-preserving function. At the same time, as there was no too much corn for storage, he could only cut the scale of pig farming by half.

According to Li Qiang, Head of Hongxinglong's Grain Administration Bureau, since the fall of 2016, the "grain banks" basically did not operate the business of corn value preservation, mainly due to the impact of the market downward trend. In 2017, farmers were afraid of a decline in the rice market, and very few farmers signed contracts for value preservation and appreciation with the “grain banks”.

In the market shocks, why did the “grain bank” suddenly lose its charm and become so fragile?

Shuguang Farm, known as the "large corn farm", is a large corn producer. It  was also challenged by the same problem. Hu Yuntian, who was 51 years old and was engaged in grain storage, had profound feelings. He believed that there were following four reasons why the supports should be given. (i) Many "grain banks" did not extend the industrial chain, and the purchased and stored grains could not generate high added value, so they could only rely on market to obtain profits. When the market declined, they naturally lost their value-preserving and value-added functions. (ii) Some "grain banks" having only drying and warehousing, failed to establish direct connection with existing industries, and could only rely on food vendors, so this kind of grain banks did not form a high-quality, high-price, value-preserving and value-added sales pattern. (iii) Some members of the "grain banks" did not establish a good risk-sharing mechanism and lacked effective measures to deal with risks. When the market declined, each grain bank only focused on its own problems. (iv) The “grain bank” lacked funding sources, could not withstand pressure, and could not develop upstream and downstream related industries.

Liu Yongming was the Director of the Hongxinglong Commerce Bureau. In his opinion, if we wanted the "grain banks" to play their role better, both policy support and powerful social services were needed. The following five supports were urgently needed. (i) Special support loans should be set up by China’s government to extend the industrial chain for creating added value and resisting market risks. (ii) Some protection policies should be introduced to reduce operating costs, circulate grains well, and break through grain circulation bottlenecks. (iii) Good social service environment should be created to solve information asymmetry, realize effective connection with industries, and truly establish an integrated operation mechanism of trade, industry and agriculture. (iv) 

Operation mechanism should be standardized, legal assistance should be carried out, structural stability should be kept, so as to effectively safeguard agricultural production. (v) The “grain banks” should be guided to carry out special storage business, including purchasing special products, managing special products, and using product quality to cope with market decline.

SOURCE：

http://www.farmer.com.cn/2016/07/20/99733620.html