State-owned companies can better mind the stores of grain

OVER 1.6 MILLION TONS OF GRAIN RESERVES in Central China's Henan province have reportedly spoiled after being stored for seven years. Nanfang Daily commented on Wednesday:

The colossal waste of grain is lamentable and could have been avoided. The grain was purchased in 2010 by a local unit of the China Grain Reserves Corporation, or Sinograin as it is known. Some of it was later deemed substandard and stored locally in accordance with relevant laws, said Sinograin, which planned to sell the unqualified grain to fodder companies and industrial alcohol makers.

The grain storage company, however, said Sinograin did not pay the storage fee and refused to give the grain back until last month when the local court intervened.

Disputes over interests can happen between storage companies and the State-owned food giant, but the latter has the responsibility to avoid any unnecessary waste. Sinograin has good reason to cooperate with private storage companies, as the increase in grain reserves has fallen behind the annual increase in harvest, and many warehouses do not have adequate facilities to keep the grain from deteriorating fast. It is estimated that around 35 million tons of grain is lost each year.

Sinograin must choose qualified, reputable grain storage companies. The official response to the recently exposed waste of grain has been a draft regulation issued by the State Administration of Grain that stipulates contracted grain storage companies should be either State-owned or State-controlled. That the Henan company defied the court verdict ordering it to ship out the grain it had in storage, to some extent, has something to do with its private ownership.

Another question worth asking is how did Sinograin's local unit fall out with the storage company. The State-owned enterprise receives 70 yuan per ton ($10) for grain storage every year. The contract storage fee was 50 yuan per ton, so Sinograin still made a handsome profit. The dispute shows that both Sinograin and the grain storage companies need to be better supervised by the State Administration of Grain.