Prices fall, costs rise: how can farmers survive in the squeeze?
This year's autumn harvest is as busy as ever, but what is different is the emptiness in farmers' hearts. The reason is that the temporary state reserve price for corn, which had risen steadily for 7 years, suddenly dropped by ten percentage points this year, causing corn growers nationwide to lose more than a million.
Heilongjiang, a major grain-producing province, is currently in its busiest autumn harvest season. But for local farmers, this year's autumn harvest is very different from previous years, because the national temporary reserve price for corn, which had been in effect for 7 years and had always risen as a matter of habit, suddenly hit the brakes and reversed this year, falling for the first time. It dropped from 1.11 yuan per jin last year to 1 yuan.
It is understood that Heilongjiang's corn planting area totals 100 million mu. As the province with the largest planting area in the country, what impact will the sudden drop in the temporary reserve price have on local farmers' incomes and the adjustment of planting structure? And what measures has the local government taken in response to the sharp shrinking of farmers' incomes?
Longjiang County in Qiqihar, Heilongjiang, is known as China's number one corn county. Its local corn planting area reaches as much as 4.2 million mu, and growers generally farm relatively large areas. For them, even a fluctuation of one mao, or even one fen, in the corn price translates into an enormous difference in income. Longjiang County Dongfanghong Agricultural Machinery Cooperative planted 5,000 mu of corn. Chairman Ma Jinsheng told reporters that calculated at the current temporary reserve price, this year's income is estimated to fall by more than a million.
Ma Jinsheng: The price gap now (for grain purchases) is more than one mao per jin. At 30 percent moisture it can fetch 7 mao. At this time last year, 30 percent moisture sold for 8 mao 4, 8 mao 5. With more than 5,000 mu of land, at 1,200 to 1,300 jin per mu, that is 200 yuan less income per mu, at least more than 1 million.
Ma Jinsheng said corn prices have fallen, but the cost of farming inputs has risen year after year over these years: dry-field land rental is 450 yuan per mu, seeds, pesticides and fertilizer together add up to more than 300 yuan, and adding fuel costs, labor costs and so on, they have basically worked for nothing. Next year, the cooperative will have to think hard about how to adjust its crops.
Ma Jinsheng: Nobody is making money this year. Our year has not been good, with drought and low temperatures, and the corn has not grown very well. Now after harvest it is at 34 or 35 percent moisture. We will have to see after the New Year, see what price corn goes to later, and think about planting something else, just planting less. After the New Year we have decided to switch some land to rice, which gives stable yields whether there is drought or flood.
The reporter learned that the national temporary storage corn purchase policy for the Northeast region was issued on September 18. The temporary reserve price for corn tightened across the board, falling from 1.11 yuan per jin last year to 1 yuan, and the future trend may continue to decline. The room for farmers to increase income by growing corn has already become narrower and narrower. Regarding the change in the temporary reserve price, Wu Hao, director of the Qiqihar Agricultural Committee, believes this severely reflects the dual new challenges facing China's grain production: the "ceiling" of agricultural product prices capping them, and the "floor" of production costs rising.
Wu Hao: Facing the problems currently confronting the agricultural and rural economy, especially the gradual rise in production costs, the national subsidy policy has basically reached ceiling level. In the future, agriculture must focus on quality and efficiency, enable farmers to improve economic returns, respond to market changes and price adjustments, and meet market challenges.
Since the corn temporary reserve price was launched in 2008, by convention it has risen steadily every year, but this year's adjustment of the support price has had no small impact on farmers. Of Heilongjiang's more than 200 million mu of cultivated land, 106 million mu is corn. Calculated at 1,000 jin per mu, the province will lose 12 billion yuan in income, which works out to about 700 yuan less per person for farmers. Li Shirun, deputy inspector of the Heilongjiang Provincial Agricultural Committee, said the new situation is forcing Heilongjiang to deepen the adjustment of its agricultural structure, "not hang oneself from a single tree," change the pattern of relying solely on grain growing for income growth, and broaden channels for farmers to prosper.
Li Shirun: "Transform the mode, adjust the structure, increase returns." From Longjiang's actual situation, this kind of transformation must also be carried out, shifting from the dual structure of grain and cash crops to a three-part planting structure, that is, a large-scale, high-efficiency three-part planting structure of grain, cash crops and feed, to increase farmers' returns.
But "transforming the mode and adjusting the structure" is not easy either. From 2010 to now, Heilongjiang's grain output has stayed stable at a scale of more than 100 billion jin for five consecutive years, but most of the grain purchased in the fields has been transferred to state reserve warehouses and is rarely absorbed by the market. Jiao Jiang, chief economist of the Heilongjiang Academy of Agricultural Sciences, pointed out that as purchase and storage prices climbed all the way up, the corn processing industry has remained sluggish. Faced with "high-priced grain," enterprises either hold back or seek other substitutes, so although the corn temporary reserve enriched farmers, it disrupted the market and increased the state's fiscal burden.
Jiao Jiang: In today's market economy, enterprises do not store grain. Since 2005, the state has had production greater than sales every year. Accumulated to now, where has it gone? The state has stored it. How much is stored now? At least 40 percent of the total. Heilongjiang has stored a year and a half of total output. The state should carefully study scientific grain storage.
According to data released by Heilongjiang, as of April this year, the province's grain purchase and storage volume reached 170 billion jin, equivalent to a full year's grain output all sitting in warehouses "sleeping." A survey by the Heilongjiang Provincial Agricultural Committee also shows that starting in August, the price of corn starch fell rapidly from 2,900 yuan per ton to 2,200 yuan per ton, with starch processing losing about 350 yuan per ton. Most local enterprises successively shut down or cut production, lacking any pulling power for a rise in corn prices.
Li Shirun, deputy inspector of the Heilongjiang Provincial Agricultural Committee: The profit margin of enterprises processing downstream products has shrunk. Some are even running at a loss, so the profit margin has decreased, and therefore in purchasing, the processing enterprises are also slowing down.
As subsidy policies adjust and production costs keep climbing, Heilongjiang, squeezed by both the price "ceiling" and the cost "floor," is seeking a way out. "A boat sailing against the current must forge ahead or it will be driven back." If agriculture is still developed in the traditional way, Heilongjiang's grain output advantage will gradually disappear, and the more grain it produces, the heavier the burden may become. In this regard, Xu Xueyang, deputy director of the Heilongjiang Provincial General Bureau of State Farms, pointed out that corn will be a major focus of Heilongjiang's planting structure adjustment.
Xu Xueyang: The contradiction between a bumper harvest and purchase and storage is the most important contradiction. What follows is the contradiction between purchase and storage and sales. The third contradiction is that between a bumper harvest and income. These three contradictions should be the most important issues for the reclamation area to base itself on in adjusting and resolving. At present, Heilongjiang reclamation area has 13 million mu of corn planting area, mostly concentrated in the high-latitude areas of the northwest. This is also a key focus of the province's corn adjustment, and it should take the lead in setting an example and opening up a path in structural adjustment.
The purpose of this change by the state is to resolve the distorted relationship among the current corn price, inventory, and supply and demand. Although Heilongjiang's agricultural development and farmers' incomes will bear new shocks, the day of agricultural transformation will come sooner or later. Only by gradually finding the right direction of development amid the pains will a major agricultural province become a strong agricultural province.
Wang Zhonglin, director of the Heilongjiang Provincial Agricultural Committee, said that next, Heilongjiang plans to shift from extensive management that relies on resource consumption and exceeds ecological carrying capacity to sustainable development, so as to reduce the impact of price reform on farmers.
Wang Zhonglin: Strengthen research on end markets, do a good job of connecting production and sales, raise the level of industrialization, specialization and organization, promote farmers' income growth, and at the same time improve market competitiveness.