Against the backdrop of a large population and limited land, why does China's grain sector show the coexistence of "three highs"?

According to data recently released by the National Bureau of Statistics, the total national summer grain output in 2015 was 141.066 million tons, an increase of 3.3% over 2014. With this, China's summer grain achieved a “twelve consecutive years of bumper harvests.”

While total grain output keeps climbing, China's grain imports have also been growing rapidly. The latest data from the General Administration of Customs show that in the first half of this year, China imported a cumulative 16.29 million tons of grains and grain flour, including wheat, corn and barley, a year-on-year increase of more than 60%.

It is worth noting that while grain output and imports both “increased,” China's total grain inventories have also reached a historic high in recent years.

A reporter learned from the National Food Administration that over the past 10 years, the average annual growth rate of domestic grain output was less than 3%, while the inventory growth rate exceeded 8%. Some major grain-producing areas face enormous pressure to purchase and store grain, and some varieties have seen periodic oversupply.

A notice recently posted on the website of the National Food Administration on doing a good job in 2015 autumn grain purchasing and autumn safe grain storage said that at present China's grain inventories have reached a new high, the amount of grain stored by various grain and oil storage enterprises is unprecedented, and the amount of state policy grain stored in open-air and simple storage facilities is also unprecedented. The shortage of warehouse capacity in major grain-producing areas is prominent.

Chen Xiwen, deputy head of the Central Rural Work Leading Group and director of its office, believes that China's total grain output and total demand gap is less than 50 billion jin, yet imports exceed 100 million tons, and the main reason is the excessive gap between Chinese and foreign grain prices.

To reduce imports, improving production efficiency and strengthening the competitiveness of agriculture is also a way. However, this is difficult to achieve. According to research by the UN Food and Agriculture Organization, an agricultural operation scale of no less than 170 mu for cash crops and no less than 300 mu for grain crops is needed to be internationally competitive. But China currently has serious fragmented land management, with only 380 million mu of land transferred, accounting for 28.8% of total arable land. Most arable land is still in the hands of individuals, and before comprehensive transfer is completed and large-scale operations are formed, domestic agriculture will find it hard to be internationally competitive.

Even large-scale agriculture does not have a promising outlook. Huang Jikun, director of the Center for Chinese Agricultural Policy of the Chinese Academy of Sciences, once said that China's actual labor wages have grown at an average annual rate of about 8% since 2005, and cultivated land rents rose by 51% and 70% in Northeast and North China respectively between 2008 and 2013. He believes this upward trend will become more obvious in the next ten years. He further pointed out that changes in the cost of materials (tradable goods) are global, but changes in the cost of labor and land (non-tradable goods) are domestic, and are factors that significantly affect the international market competitiveness of agricultural products. He also believes that in some fields, the loss of China's agricultural comparative advantage is not merely temporary.

In response to this issue, People's Daily also published a rare article pointing out that the “simultaneous increase of three quantities” reflects that China's agricultural competitiveness is not strong. The article said, “The phenomenon of simultaneous increase of three quantities is a new situation under the new normal. There is inevitability to its emergence. Some domestically short varieties indeed need to be imported, but the fundamental reason is still that international competition is becoming increasingly fierce and China's agricultural competitiveness is not strong.” said a relevant official of the Ministry of Agriculture.

⟦NL> According to a report by Ban Yue Tan, Cheng Guoqiang, secretary-general of the Academic Committee of the Development Research Center of the State Council, said that in recent years the main driver of China's grain output increase has been corn. “In the past 10 years, corn output grew at an average annual rate of 5.2%, with cumulative growth of 65% over 10 years. Ten years ago China's annual corn output was 130 million tons; now it is 215 million tons. Ten years ago corn output was not as much as rice; now it has surpassed rice to become China's largest grain crop.”

Correspondingly, China's corn sown area has increased year by year, with a cumulative increase of 45% over 10 years. Over the same period, wheat sown area increased by 12%, rice increased by 7%, while other miscellaneous grain crops, such as minor varieties needed by the domestic market like miscellaneous beans and buckwheat, saw sown area decrease by 25%. In addition, soybean area fell sharply, and most of the freed-up land was planted with corn.

The sharp increase in corn area and output was the result of continuous policy-driven price increases. “Now if Northeast corn is shipped to the Guangzhou port, compared with foreign corn shipped to the Guangzhou port, the price difference is 700 to 800 yuan per ton. If there were no tariff quota management, foreign corn would flood the domestic market in an instant.” Cheng Guoqiang said.

It is understood that China applies quota management to imports of major grains such as corn, wheat and rice, but many other minor grain varieties have no import restrictions. Precisely because of this, when domestic corn prices are abnormally high, imports of international substitute grains increase rapidly. For example, last year imports of sorghum and feed barley both exceeded 5 million tons, with the former increasing 3 times and the latter also doubling.

At the same time, China's corn inventory is more than 100 million tons, equivalent to the output of a whole year in earlier years. Cheng Guoqiang said that we do not need to produce all grain ourselves. First, resources and the environment cannot support it; second, from the perspective of food security, it is also unnecessary.