China Early Rice Planting Profit Analysis in 2013 and Outlook in 2014

By CnAgri2014-03-31 10:39:42 Print According to market monitoring, prices for agricultural resources declined during Dec. 2012 and July 2013 and price for early rice rose propped by national policy since July 2013. Unit yield of early rice increased and cash income of farmers saw significant increase but considering cost increase of land and labors, the cost/profit ratio edged down. In Feb. 2014, China raised minimum purchasing price for early rice again by 2.27% to RMB2700/MT. Farmers’ cash income continues increasing but cost/profit ratio kept stable. Planting area of early rice is predicted to run stable in new crop year.

1. Planting Cost Analysis

According to market monitoring, fertilizer price declined 2.94% averagely in Dec. 2013-July 2013.
According to monitoring of NDRC, fertilizer cost for early rice is estimated at RMB1953/hectare in 2013, down 9.12% year on year. Renting and fuel cost is RMB2783/hectare, up 5.11% and seed cost is RMB757/hectare, up 8%. Taking labor and land cost into consideration, total cost is RMB15279/hectare in 2013, up 5.49%. 
Since preparation of agricultural resources for early rice planting during Dec. 2013 and Feb. 2014, fertilizer price averagely declined 7.96%. If the state can control general price level and keep stable of agricultural resources prices, rice production will have a good start in 2014.

Based on current price level, in 2014, fertilizer cost shall decline 9.12% to RMB1775/hectare, renting and fuel cost decline 4.445 to RMB2907/hectare and seed cost increase 2% to RMB772/hectare. Taking labor and land cost into consideration, total cost is RMB17970/hectare in 2014, up 4.59%.

2. Unit Planting Profit and Cost/Profit Ratio

In 2013, unit yield of early rice increased 1.86% and protective procurement price rose 10.00% to RMB2640/MT. But the growth rate of early rice market price was only 1.40%, far lower than growth rate of protective procurement price . According to unit yield and price, planting profit of early rice wad RMB17181/MT in 2013, up 4.98% year on year, net profit was RMB1902/hectare, up 1.13% and cost/profit ratio was 12.15%, down 0.55% year on year.

In 2014, as China raised protective procurement price for early indica rice from RMB2640/MT to RMB2700/MT, up 2.27%. Based on the adjustment, rice planting output value is RMB17970/hectare in 2014, net profit is RMB2033/hectare and cost/profit ratio is 12.81%, up 0.3%.

In Ma Wenfeng’s opinion, fertilizer price decline and protective procurement price rising can offset increase of labor cost, good for planting profit increase and stabilization of grain planting area in 2014.

3. Input and Output in Early Rice Planting Industry

In 2013, planting acreage of early indica rice was 5.792 million hectares and output value was 99.5 billion yuan, up 5.48% from 2012. Planting profit was 11 billion yuan, up 1.60% from 2012. Sales of commercial grains registered 25.46 million MT with value of 68.7 billion yuan, up 9.52% and 13.37% year on year.

Input in material and service in early rice planting totaled 38.1 billion yuan, up 3.30% year on year, including 11.3 billion yuan in fertilizer, 4.384 billion yuan in seed and 4.048 billion yuan in pesticide, down 2.92%, up 8.51% and up 3.49% respectively. Input in agricultural service totaled 16.12 billion yuan, up 5.61% from 2012.
In 2014, early rice planting acreage is predicted to keep stable at 5.839 million hectares. According to preliminary calculation, total output value of early rice shall reach 104.9 billion yuan and total profit 11.9 billion yuan, up 5.43% and 7.75% respectively. Sales of commercial grains shall reach 27.7 million MT, valuing 77 billion yuan, up 8.80% and 12.06% respectively.

In 2014, input in material and service in early rice planting is predicted to be 38.17 billion yuan, up 0.18% year on year, including 11.364 billion yuan in fertilizer, 4.508 billion yuan in seed and 4.0 billion yuan in pesticide, up 2.82%, down 1.21% and up 5.29% respectively. For input quantity, fertilizer shall register 1.869 million MT, seed 296,000MT and agricultural film 27,000MT, up 1.66%, 0.75% and down 0.99% respectively.

4. Advice on Market Investment

Due to rapid growth of agricultural materials prices since Aug. 2013, industry capacity saw fast expansion, causing severe surplus capacity and price decline. After industry integration and elimination in 2013 and 2014, agricultural material industry is predicted to usher good opportunity in the second half year of 20144 and 2015. Besides, with rapid growth, mechanical work, irrigating service and technical service have become important investment directions.

To cope with current dilemma, powerful agricultural material enterprises need accelerate upgrade in technology and service, especially in formulate fertilization and fertilizer delivery.

From “China Grains Market Weekly Report”