The Diversification of Equity Promoting the Prosperity of Storage Bases

SINOGRAIN established a modern large-scale grain warehouse within the jurisdiction of Heilongjiang 852 Farm. 

Photo by Zhou Ke

In the spring of Great Northern Wilderness (locating in Northern China), farmers were busy preparing for farming.

Li Qiu, a rice farmer in the Xitonghe Administration Area of the Raohe Farm of the Hongxinglong Administration Bureau for Agricultural Reclamation in Heilongjiang Province, went to the seedling-raising base every day to clean the snow and cover the shed film. He said: "Our grains used to be unsalable even until March and April in coming year. They are often piled in drying yards and along the ditches, for the fear that they will go moldy in the warm temperature. Now, after grains are threshed in autumn, the transportation truck will come, so we can work at ease in spring."

The Raohe Farm is located on the banks of the Wusuli River and faces Russia across the river. It suffered from the remote location and inconvenient transportation for a long time. The grains had to be transported to other places through rugged mountain road, so they were unsalable. From 2014 to 2017, the farm attracted RMB 217 million yuan of investment and built three storage bases with a capacity of 322,000 tons, which solved the problem of "unsalable grains".

Zhu Baohua, Director of Raohe Farm, said: "It is the diversification of equity that has solved the financing difficulties in building a storage base and ensured the safety of food management."

It is the diversification of equity that has allowed the Hongxinglong Company to build 39 grain storage bases with a storage capacity of more than 3.44 million tons.

Activating investment mechanism-storing grains in warehouses safely

"Jun'an Grain Storage Cooperative" in the 291 Farm was filled with the fragrance of grains.

According to Liu Baojiu, a member of the cooperative, there was no storage warehouse in the past, so the farmers could only queue up to sell grains at the Sinograin Depot in Jixian County, Heilongjiang Province. It took farmers a long time to sell grains. Sometimes, farmers had to wait for one week before a vehicle of grains could be sold. Especially in the rainy season of autumn, farmers would be more worried as the moisture content of grains was much higher. In order to prevent the grains from rotting in the field or drying yard, farmers had to sell grains to grain traders at a lower price. Now, everything changed, farmers built a grain processing plant in the form of shareholding cooperation and could store and dry grains, and so they would not worry about grain storage.

Hongxinglong was a state-owned enterprise with more than 7.2 million mu (1 mu = 0.067 ha.) of arable land and a grain production capacity of more than 4.3 million tons. Based on the governmental investment, it built 8 state-owned storage bases with a storage capacity of 490,200 tons, but the storage bases could not meet the needs of fast-growing grain production capacity and the grain management could not be fully guaranteed.

In response to practical problems, Hongxinglong decided to break the shackles of a state-owned enterprise, started to provide social services, and used diversified equity to instill vitality into the development of storage bases.

How to diversify equity and activate the development? Hongxinglong had its own answer, namely diversifying equity and activating development through management. That is to say, under the unified construction requirements, the diversified equity financing should be developed, service scope should be better controlled and liberalization would be realized in a planned manner so as to avoid the low-level repetitive construction and the scramble for resources. Under the new mindset, Hongxinglong made it clear that the storage bases must be comprehensively constructed, and must realize the drying and storage simultaneously. The warehouse capacity must be declared before the construction of bases, and the base inventory must be reasonably planned according to the production needs.

In order to effectively enhance the utilization rate of social funds, Hongxinglong introduced new policies, i.e.,, no restrictions on the investment ratio, the financing form, the scale of storage capacity and the operation entity, and encouragement on the construction through sole proprietorship, joint stock cooperation, joint-stock system and cooperatives.

The Shuangyashan Farm was characterized by insufficient resources and economic backwardness, so it met many difficulties in financing. Through equity diversification, Beidahuang Grain Group Holdings established a grain storage base with the storage capacity of 125,000 tons. Also, it set up three storage bases with the storage capacity of 166,000 tons in the form of cooperatives, so as to ensure the safety of grain management and provide effective services for surrounding villages.

At present, a total of 31 private storage bases were established by the Hongxinglong Administration Bureau, with a storage capacity of more than 2.95 million tons. There were continuous rain seasons in the autumn for two consecutive years (2013 and 2014) in the Shuangyashan Farm. After October, the drying equipment ran 24 hours a day and the warehouses were all available to ensure that 100% of the grains were stored before October 15 and no mildew occurred.

Giving full play to the role of warehouses in activating the market mechanism-to maintain and increase the value of grains

"After storing the paddies here for more than three months, the price of paddy per 500 g was increased by RMB 0.05 yuan, so I made over RMB 30,000 yuan more at once." Said Jin Yongshun hilariously, a rice farmer in the eighth management zone of Youyi Farm. He just received the previous year’s payment for grains from "Dingxin Grain Storage Base" of Hongxinglong.

According to Lv Hongjun, the person in charge of "Dingxin Grain Storage Base", “Our storage base is a grain bank. We can store grains but also have the right to manage grains. Farmers can store grains and sell them whenever they want. The settlement is based on current prices."

Hongxinglong gave the storage bases the right to manage grains, and conducted grain management based on market operations. It clearly activated "three market mechanisms", i.e., providing producers and operators with trade rights under the principle of mutual willingness, giving them access to market development rights under the prerequisite of allocating tasks in a sound manner, and expanding the service scope of the base under the prerequisite of fulfilling the local service projects well.

With the activated mechanism, the storage base of the Beidahuang Grain Group Holdings and another three cooperative storage bases in Shuangyashan City were integrated to form a new group. The annual grain transaction exceeded 400,000 tons, which ensured 100% value preservation of grains. The annual income could be increased by more than RMB 10 million yuan, and farmers could earn over RMB 3 million yuan more in Baoshan District, Shuangyashan City.

Seven grain storage bases, such as "Guangliang Storage Base" of Jiangchuan Farm, spontaneously established Jiangchuan Rice Industry Co., Ltd., and developed the "Jiangchuan" brand rice, which was rated as a well-known trademark in Heilongjiang Province. Furthermore, a total of 80,000 mu of organic rice production base was completed, which increased the economic income of farmers by RMB 320 yuan per mu. The new company processed and transformed 468,000 tons of grains annually, and established 12 sales points for the products across China.

The storage bases built by the Hongxinglong Administration Bureau, managed and sold more than 1.3 million tons of grains for farmers in 2017, achieving an growth in the economic income of more than RMB 100 million yuan for farmers.

Activating circulation mechanism by integration between warehousing and logistics, so as to facilitate the transportation of grains

During the Spring Festival, a special train full of grains from the 597 Farm Industrial Park headed towards the Dalian Port every day.

According to Liu Yongming, Director of the Hongxinglong Bureau of Commerce, in order to improve grain circulation, Hongxinglong Administration Bureau vigorously promoted the process of the integration between warehousing and logistics, and encouraged the extension of railway lines and the construction of logistics platforms through individual investment, joint investment, and collective financing. Hongsheng Grain Group in the 597 Farm invested to extend the railway line into the industrial park, obtained the right to trade in river-and-sea continuous transportation, and transported more than 1 million tons of grain each year.

Hongxinglong encouraged storage bases to give full play to the logistics industry, prioritized the development of logistics and allowed the logistic companies to enter the planned industrial park, and provided the preferential policies, including free access to roads, water, electricity and communications, and free land leveling. The designated personnel would be in charge of projects and one-stop services. The local administration sector was responsible for the communication and coordination of handling relevant procedures.

Hongsheng Grain Group, which invested RMB 100 million yuan to enter into the 597 Farm Industrial Park, successfully established a full industrial chain of grain planting, purchase, warehousing, logistics and transportation under the preferential policies and successful communication and coordination with relevant administration sectors. It established Hongfeng Professional Cooperative for Grain Planting and managed 1 million mu of land with 14,000 members. It set up a total of 63 warehouses, including transit warehouses for SINOGRAIN Logistics Company, futures delivery warehouses, central reserve grain and temporary reserve grain warehouses, and trade supervision warehouses. The daily drying capacity of grains reached 3,000 tons, and a total warehouse storage capacity was 1.5 million tons. In 2017, it was the largest private grain storage enterprise in China with the largest single warehouse capacity. Also, it obtained independent trading rights and established a river-and-sea continuous transportation model to form one-stop modern grain logistics services of purchase, storage, processing, transportation and marketing.

With the advantages of agricultural reclamation city directly under Hongxinglong Administration Bureau in the center of the Sanjiang Plain, Hongxinglong built a grain storage and logistics center in the industrial park and enjoyed preferential treatment identical to the provincial industrial park. Shuangyashan Farm extended three railway lines into the industrial park in the form of a shareholding system, with an annual grain transport capacity of more than 500,000 tons.

The integrated development between warehousing and logistics significantly improved the grain circulation capacity. By 2017, over 3 million tons of grains could be transported to other places annually.

SOURCE：http://www.farmer.com.cn/2016/03/15/99733452.html