Hotspot Analysis

1 Supply and inventory composition of grain and economic analysis of the industry
1) Monthly supply and demand: It’s the harvest time of wheat, potatoes, and beans in July. The total amount of grain is expected to be 31.555 million tons. In the same month, the imports of various grains reached 2.4 million tons, and the monthly supply of grain (including the inventory at the beginning of the month) totaled 462 million tons. As far as food consumption is concerned, rations consumption, industrial consumption, concentrate consumption, and exports were 27.217 million tons, 6.952 million tons, 23.091 million tons, and 49,000 tons respectively, and the monthly consumption totaled 53.978 million tons, a significant rebound.
As for grain consumption as rations, the consumption in rural households, urban households, and out eating respectively reached 7.55 million tons, 7.035 million tons, and 12.632 million tons. In industrial consumption, the consumption of grain in deep processing and brewing  was 4.402 million tons and 2.55 million tons respectively. In terms of the consumption of grain in feed, the consumption of grain processing by-product was 6.215 million tons, and the consumption of feed grain reached 16.929 million tons. The wastage of grain was 2.39 million tons.
From January to July, the cumulative consumption of grain for rations, feed, and industries reached 171 million tons, 107.7 million tons, and 51.336 million tons respectively, decreasing by 3.59%, 5.1%, and 2.53% compared with that of the same period last year. The consumption in domestic totaled 350 million tons, a year-on-year decrease of 3.64%. Economic downturn in the first half of the year has led to the reduction in grain consumption.  
2) Month-end inventory and inventory composition
By the end of July, domestic grain inventory registered at 408 million tons, which can be consumed for 7.6 months. Affected by the current economic situation, the consumption of various grains declined, which has led to the increase in month-end inventory and safety factor in recent months. In July, grain consumption rose, resulting in the decrease in safety factor.
Inventory structure: as for the structure of grain inventory at the end of July, the inventory of paddy,l corn, wheat, barley, sorghum, and other side crops was 88.325 million tons, 39.346 million tons, 183.6 million tons, 5.018 million tons, 915,000 tons, and 90.638 million tons respectively. Larger inventory of potatoes, beans, and other side crops decides that their price indexes were lower than that of other products.
The total inventory of three major crops was 311 million tons at the end of July. From the structure of the inventory, state stockpile, farmers’ inventory, and commercial stocks of grain were 178 million tons, 64.96 million tons, and 68.25 million tons respectively, which accounted for 56.94%, 20.87%, and 21.9% of the total. By the end of July, the cumulative harvest yield of farmers in the new crop year reached 169.8 million tons. Taking the balance of last year into account, the proportion of farmers’ inventory was 70.51%. The market expectation of grain price rise accelerates the purchasing of grain by dealers.  
3) Analysis of market situation
The purchasing volume of wheat and early rice totaled 25.34 million tons in the main producing areas in July, a year-on-year increase of 37.5%, and it amounted to 51.43 million tons from January to July, up 29.5% year-on-year. The purchase volume of state-owned enterprises was 17.12 million tons in July, and it totaled 32.78 million tons in the first seven months of this year. State-owned companies will continue to lead the circulation of grain.
According to data from the National Bureau of Statistics, state-owned enterprises directly purchased 18.82 million tons of grain in June, and sold 29.71 million tons of grain, which accounted for 54.04% of the total quantity of grain sold on the market. 12.47 million tons of grain was sold through public auction and accounted for 42.0% of the total sales volume of state-owned grain.
Market prices: in August, the prices of raw grain averaged 2424yuan/ton, a month-on-month increase of 0.24% and a year-on-year decrease of 2.45%. In the same month, the wholesale price and retail price of processed grain respectively reached 3671yuan/ton and 5751yuan/ton, increasing by -0.60% and 0.10% from the month before respectively, rising by 1.66% and 0.70% year-on-year separately.
As for market values, calculated at wholesale prices, the value of raw grain was 129.4 billion yuan, up 1.17% year-on-year; the value of rations reached 75.4 billion yuan, a year-on-year growth of 11.74%; the value of processed grain reached 117.3 billion yuan, rising by 11.31% year-on-year.
In the first seven months, the market value of raw grain purchasing market totaled 842.5 billion yuan, down 8.2% year-on-year; the wholesale value and retail value of processed grain respectively reached 478.0 billion yuan and 736.0 billion yuan, falling by 4.2% and 3.2% from the year before.
In the first half of 2019, the national grain industry showed a shrinking trend, and the operation was relatively difficult.  State-owned Banks largely recovered credit funds from non-state-owned grain and agricultural enterprises, leading to a decline in the price of raw grain. As a result, the production and sales of grain industry fell. Affected by basic supply and macro-economy, grain prices will rebound in the later period.
4) Monthly consumption per capita
In July, the harvest yield and the consumption of grain were 23kg/person and 38.33kg/person. As for consumption, the monthly consumption of rations was 19.50kg/person, which’s equal to 14.63kg of processed grain per capita, and the daily calorie of rations was 1973 kilocalories. The monthly consumption of feed grain was 12.13kg per capita, while that of industrial grain was 4.98kg per capita. In the consumption of rations, the consumption for rural households, urban households, and catering respectively reached 13.4kg per capita, 8.5kg per capita, and 9.05kg per capita.
From the perspective of money spent on rations, it was 84yuan per capita, a year-on-year growth of 11.3%. The pension of 70 yuan per capita for rural areas can’t meet the demand of purchasing grain, and China’s rural areas have been in extreme poverty for many years. In the first seven months, the expenditure on rations totaled 527yuan/person, a year-on-year decrease of 3.6%.
 
2 Paddy processing, paddy consumption and industrial status  
1） Paddy processing status of enterprises above designated size
According to data from the National Bureau of Statistics, the production of rice of enterprises above designated size was 9.37 million tons in July, up 5.33% year-on-year, while the cumulative production in the first seven months totaled 59.57 million tons, a year-on-year growth of 8.43%. The data monitored by BOABC show that the output of rice in July rose by 12.65% from the same period last year, and the cumulative output was 55.64 million tons, down 4.41% year-on-year. According to the current development trend, the annual production of rice of these companies will reach 101.04 million tons, falling by 7.4% from 2012, and it’s slightly higher than the 88.56 million tons for 2011.
According to BOABC’s calculation, the output of rice in China totaled 11.24 million tons in July, and 1.87 million tons came from small enterprises. In this month, the operation rate of rice processing enterprises registered at 34.5% in the whole county, and that of medium, small and micro enterprises was 24.9%. Paddy stored for a long time was delivered from storage, resulting in that a large quantity of exports of rice and an increase in the operation rate of large scale processing enterprises.
2) Paddy consumption and inventory
16.526 million tons of paddy was processed in July in China, producing 11.24 million tons of rice and 1.653 million tons of by-product such as rice bran and broken rice. Taking the consumption of paddy for feed and industries, the total consumption of paddy including the exports of rice (converted into paddy) is predicted to be 18.91 million tons in July. The inventory of paddy was 883.25 million tons at the end of July. As the harvest yield of early rice in July couldn’t offset the consumption in the same month, the inventory saw no increase, and the safety factor was 4.8, at a relatively low level.
Newly increased supply: in July, the harvest yield of early rice was 17.484 million tons, decreasing by 4.64 million tons or 20.96% from last year. The reduction in output and the fact that rainfall in many regions delayed the harvest had an impact on the harvest yield in July. The imports of rice (converted into paddy) reached 221,000 tons in July, up 74% year-on-year, and it accounted to 2.159 million tons in the period from January to July, down 21.7% year-on-year. Taking the balance of last month into account, the monthly supply of paddy totaled 107 million tons.
In terms of circulation, the purchasing volume of early indica rice in main producing areas was 1.872 million tons in July, down 32% year-on-year. It’s estimated that state-owned companies purchased 561,600 tons of rice. In this month, 12.24 million tons of paddy was put on the market by state-owned enterprises, and 2.07 million tons was traded at an average price of 1983yuan/ton, which increased somewhat compared with that in previous months. The sales volume of state-owned grain is predicted to be 4.45 million tons in July.
In terms of inventory composition, the total amount of state-owned rice was 59.64 million tons, including 44.97 million tons of temporary reserve and 14.68 million tons of state reserve. Processing enterprises, trading enterprises, and farmers respectively had 6.61 million tons, 8.5 million tons, and 13.58 million tons on hands. Farmers have sold 51.07% of their grain, and the percentage is higher than that of the same period last year, which led to a slight growth in paddy price in August.
3)Market status of paddy industry
In July, paddy prices averaged 2491yuan/ton, a year-on -year decrease of 7.4%, while the factory price of rice was 4152yuan/ton. In August, the price of paddy reached 2492yuan/ton, down 5.4% year-on-year, while the factory price of rice was 4131yuan/ton. The sales revenue and the gross profit of rice processing industry respectively reached 46.7 billion yuan and 7.1 billion yuan. The profit of rice processing was 634yuan/ton, achieving a gross profit rate of 15.27%. The decrease in the prices of paddy and rice has led to the decline of profit rate as well as the growth in sales revenue and profits.
4)Rice supply and consumption
In July, the imports of rice were 150,000 tons, and the supply including the balance of last month, the production and imports in this month totaled 12.528 million tons. As for rice consumption, food consumption, industrial consumption, feed consumption, and exports of rice were 10.210 million tons, 315,000 tons, 564,000 tons, and 343,000 tons respectively, totaling 11.431 million tons. The inventory was 1.097 million tons at the end of this month, seeing some decline. In this month, the selling rate of rice registered at 101.7%.
Food consumption: the consumption of rice as food by households, catering sector, and food industry respectively reached 5.88 million tons, 4.218 million tons, 112,000 tons. In household consumption, urban consumption and rural consumption were 2.376 million tons and 3.504 million tons respectively. Household consumption and catering consumption are the main body of rice market.         
As per capita consumption in July, the consumption of rice was 7.9kg per capita , of which, 7.3kg was consumed as food. In food consumption, household consumption was 4.2kg per capita and catering consumption was 3.0kg per capita. As for per capita rice consumption in households, it was 4.2kg in rural areas and 2.9kg in urban areas.   
3 Flour processing, wheat and flour consumption, inventory composition and industrial status in China
1) Flour enterprises above designated size
According to data from the National Bureau of Statistics, the production of flour of enterprises above designated size was 7.49 million tons in July, up 6.8% year-on-year, while the cumulative production in the first seven months totaled 50.28 million tons, a year-on-year growth of 6.0%. The data monitored by BOABC show that the output of flour in July fell by 12.75% from the same period last year, and the cumulative output was 49.02 million tons, down 23.61% year-on-year. According to the current development trend, the annual production of flour of these companies will reach 80.91 million tons, falling by 6.9% from 2010, and it’s higher than the 79.6 million tons for 2009.
In this month, the operation rate of flour processing enterprises registered at 50.6% in the whole county. Specifically, the operation rate of enterprises above designated size was 53.7%, while that of medium, small and micro enterprises was 16.4%. The exiting of numerous enterprises and sufficient supply of raw grain after harvest resulted in the increase of operation rate.  
2)Wheat consumption and month-end inventory
10.092 million tons of wheat was processed in July in China, producing 7.468 million tons of flour and 2.624 million tons of by-product. The improvement in wheat quality restrained the consumption of wheat as feed and industrial raw material, and the total consumption of wheat is expected to be 11.005 million tons in this month. The inventory of wheat was 184 million tons at the end of July, reaching a safety factor of 16.7. The increase in operation rate led to the decline of monthly safety factor in July.   
In July, the harvest yield of wheat was 6.954 million tons, and the imports of wheat reached 199,000 tons, up 74% year-on-year. In the first seven months of 2019, the cumulative harvest yield totaled 133 million tons, while the imports amounted to 1.826 million tons, a year-on-year decrease of 6%. In terms of wheat purchasing, the purchasing volume in main producing areas was 49.56 million tons from January to July, and 32.21 million tons was purchased by  state-owned companies and 17.35 million tons was purchased by private enterprises. 15.21 million tons of wheat was traded at the minimum purchasing price. The marketing of wheat reserved by the state in last year has been finished, and the trading volume of state-owned grain is expected to be 670,000 tons.
In terms of inventory composition, the total amount of state-owned wheat was 97.72 million tons. Processing enterprises, trading enterprises, and farmers respectively had 5.77 million tons, 13.9 million tons, and 65.93 million tons of wheat on hands. Farmers have sold 51.45% of their grain, and the percentage is higher than that of the same period last year, which led to a slight growth in wheat price in August. The growth in flour supply resulted in the decline of flour factory price.
3) Market status of wheat industry
In July, wheat prices averaged 2310yuan/ton, a year-on -year decrease of 3.7%, while the factory price of flour was 3051yuan/ton, down 0.4% year-on-year. In August, the price of wheat reached 2317yuan/ton, down 4.0% year-on-year, while the factory price of flour was 3011yuan/ton, falling by 1.8% year-on-year. The sales revenue and the gross profit of flour processing industry respectively reached 27.5 billion yuan and 3.8 billion yuan, increasing by 11.42% and 35.2% year-on-year respectively. The profit of flour processing was 359yuan/ton, achieving a gross profit rate of 13.76%, which rose by 21% year-on-year. The price of new wheat declined, but the price of flour remained high, which brought a relatively high profit.
4) Flour supply and consumption
In July, the imports of flour were 20,000 tons, and the supply including the balance of last month, the production and imports in this month totaled 8.178 million tons. As for consumption, food consumption, industrial consumption, feed consumption, and exports of flour were 7.131 million tons, 1.034 million tons, 34,000 tons, and 19,000 tons respectively, totaling 7.483 million tons. The inventory was 695,000 tons at the end of this month. In this month, the selling rate of rice registered at 100.2%.
Food consumption: the consumption of flour as food by households, catering sector, and food industry respectively reached 2.657 million tons, 3.41 million tons, 1.034 million tons. The latter two far exceeded the farmer, so the marketing of flour was dominated by production users. In household consumption, urban consumption and rural consumption were 791,000 tons and 1.896 million tons respectively.  
As per capita consumption in July, the consumption of flour was 5.35kg per capita , of which, 5.11kg was consumed as food. In food consumption, household consumption was 1.93kg per capita, catering consumption was 2.44kg per capita, and food industrial consumption reached 0.74kg per capita. As for per capita flour consumption in households, it was 3.36kg in rural areas and 0.95kg in urban areas.