Spat Over Bill Leaves 160,000 Tons of Wheat to Rot

(Beijing) — More than 160,000 tons of wheat were left to rot in a warehouse in China for over seven years due to a dispute over the bill — a spat one expert says underscores the need for reform in the heavily state-steered grain sector.

State-owned China Grain Reserves Corporation (Sinograin) is the country’s largest buyer of grain, often at prices far above the international market to boost Chinese farmers’ livelihoods.

It leased storage space from Jinshuo Grain and Oil Co. located in Henan, which is one of the largest grain-yielding provinces in China.

Jinshuo Grain said Sinograin wouldn’t pay its bill, so the small company stopped the upkeep of the grain storage, ending ventilation and pest control measures, the China News Service reported. But Sinograin said in a statement Monday that the grain company refused to give the grain back even after a buyer was found in 2014, because “its financial demands were not met.”

As a result of the tug-of-war, enough wheat for 45 million standard-sized boxes of cereal went to waste. The costs for keeping the grain in condition mounted to over 1 million yuan ($144 thousand), according to the China News Service.

“I can’t believe that such a large state-funded body would fail to pay their rent,” Jinshuo owner Zhang Qingwei told Caixin in a phone interview. He also disagreed with Sinograin, saying “the wheat was not sold until March 2015, not 2014.”

The moldy grain is now finally in the process of being removed from the storage space.

The waste hit a nerve among citizens in a country that in the last century suffered a massive famine.

“Heaven forbid! It’s only been a few decades since we’ve been living on a full stomach, what a terrible waste. Feed it to the authorities responsible!” wrote Yishanyishao, one angry user on Weibo, China’s version of Twitter.

As the state’s grain-reserve monopoly, Sinograin squirrels away its heavily subsidized grain to fend off the threat of food shortages after decades of low grain reserves.

Normally, a grain reserve network consisting of farmers, food processing companies, and local governments would help smooth out volatile prices, said Zheng Fengtian, an agricultural economics professor at the People’s University of China. “But when everything is taken care of by a state monopoly, that breeds corruption and inefficiency.”

Food security is deemed a national security issue, and there is little disclosure or transparency surrounding China’s grain reserves. The “excessively high” amount of reserves — well over an average 15% of the annual production rate adopted by most other countries, according to Zheng — coupled with mismanagement and a lack of supervision lead to problems like the wasted grain in Henan, he said.

An investigation in 2013 into the grain sector by China’s central disciplinary committee found “a severe lack of internal supervision that has led to frequent low-level corruption cases, exaggerated figures to cheat subsidies, and even the practice of mixing sand with grain.”

Meanwhile, state broadcaster CCTV last year reported that Sinograin and some granaries passed off stale grain as fresh harvests to garner higher prices.

“The visible hand is sending out misleading market information to farmers at the cost of taxpayer, and the only ones benefiting are the people up and down the ladder at Sinograin,” Zheng said.

Contact reporter April Ma (fangjingma@caixin.com)