Bags of rice for sale at a grocery store in Beijing. [Photo  / Bloomberg]

New kid on the block makes his mark during staple price talks

BEIJING - The season for autumn grain purchasing is upon us but this year various factors are making it more complicated, partly because of the involvement of a new participant, the Yihai Kerry Group.

As a result of adverse weather, international price fluctuations and speculation, grain prices for corn, wheat and rice have been vacillating widely, despite repeated assertions that stockpiles are abundant.

Average purchasing prices for rice and corn in major autumn grain production areas have surged by 20 to 30 percent from a year earlier, said Li Guoxiang, researcher of the Chinese Academy of Social Sciences' Rural Development Institute.

In contrast to the rise in prices, market trading is relatively inactive. Higher prices have raised farmers' expectations for even higher prices in the future, prompting them to store grain rather than to sell it, Li said.

Furthermore, favorable prices offered by big companies such as Singapore agricultural business Yihai Kerry have also fuelled farmers' market expectations, said analysts.

Yihai Kerry is the Chinese subsidiary of Singapore agribusiness conglomerate Wilmart International Ltd. It is the biggest edible oil supplier in the Chinese market and is run by chairman and chief executive officer Kuok Khoon Hong, one of Singapore's richest businessmen.

To support the rapid growth of its grain processing business, Yihai Kerry has joined in the grain purchasing process in major production areas.

"I haven't sold a grain of my paddy rice so far, and most farmers in my county are reluctant to sell their grains," said Shan Yiheng, a farmer in Zhaodong, Heilongjiang province.

Zhaodong is famous for its corn and rice in Northeast China. Shan is one of the biggest local farmers in terms of sown area. His approximately 20-hectare farmland performed very well this autumn with yields of about 100 tons of paddy rice.

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"The current purchasing price here is about 140 yuan ($21.2) for every 50 kilograms of paddy rice, higher than last year's 124 yuan, but it's still lower than my expectation. All kinds of costs are rising this year, so why not grain?" he asked.

Shan said Yihai Kerry has started purchasing rice in neighboring cities in Heilongjiang province such as Wuchang and Jiamusi since this autumn with prices about 10 yuan higher for every 50 kilograms.

"It's obvious that farmers prefer to sell grains to companies such as Yihai Kerry because the price is more favorable," Shan said.

However, Shan's opinion isn't shared by everyone.

Grain issues are extremely sensitive and can easily trigger arguments over food safety in a country where agriculture has been the dominant economic sector in its long history. As the old Chinese proverb goes, "Food is the God".

Yihai Kerry's participation has made the grain purchasing market more complicated, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Ltd.

In previous years, about 60 percent of the grains were purchased by Stated-owned companies such as the China Grain Reserves Corporation (Sinograin) and the rest went to small- and medium-sized private companies.