The problem of cheap grain hurting farmers requires a long-term mechanism to prevent it

As China's agriculture gradually integrates into the wave of globalization, domestic grain prices will gradually approach the low levels of international grain prices, and the pressure of global competition facing China's agricultural sector will also gradually increase. Therefore, raising the level of China's agricultural modernization and international competitiveness, and gradually returning the power to determine grain prices to the market, is the wise choice that conforms to the development of the times.

□Gu Muqing

According to reports, as autumn grain harvests have successively been gathered in various regions, the purchase prices of China's three major staple grains have shown a trend of sharp decline. Among them, the price of corn has fallen significantly, with the average price decline for farmers exceeding 20%, and the highest year-on-year decline of about 30%; wheat experienced a cliff-like drop in the period before October; and rice purchase prices have generally trended downward while remaining stable compared with previous years. Because the price elasticity of demand for agricultural products is relatively small, low grain prices may directly lead to a sharp shrinkage in farmers' grain-growing income. Relevant persons pointed out that a 20% to 30% drop in grain prices may reduce farmers' income by about 100 billion yuan, and if vaguely estimated according to the marginal propensity to consume of rural residents of about 70% to 82%, it may affect GDP growth by about 1% through the consumption channel.

The fundamental cause of this round of grain price decline is the interaction and superposition of low global commodity prices, domestic supply-demand imbalance and mismatch, and inventory backlog. Due to the dual superposition of the global economic stagnation cycle and the debt cycle, deflation risks have intensified, and global commodity prices have generally fallen. Recently, the price difference per ton of domestic and international soybeans, wheat, corn, and rice has been roughly in the range of 500 to 1,000 yuan. As barriers between the domestic market and the global market gradually disappear, the price gap between domestic and international grain prices gradually narrows. Moreover, the nominal effective exchange rate and real effective exchange rate of the renminbi have shown a steady appreciation trend over the long term, China's grain imports have continued to increase, the previous domestic grain supply-demand balance has been broken, and domestic grain sales space has been squeezed, which to a certain extent has also slowed the process of de-stocking grain warehouses. At the same time, as the State Administration of Grain recently announced, “at present, China's grain inventory has 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.” There is a serious phenomenon of excess grain storage in China. Insufficient warehouse capacity has caused the grain trading market to show supply exceeding demand and difficulties in purchasing, and grain prices have been greatly suppressed.

From a macro-level analysis, the decline in domestic grain prices may have a certain impact on the national economy. In addition to affecting the current income of rural residents and affecting China's GDP through the consumption channel, if based on a general equilibrium analysis perspective, the decline in grain prices may also exert downward pressure on the prices of downstream industries such as grain and oil, flour, and other food products; it may cause feed prices to remain low, reduce breeding costs, and, together with the fact that the second half of the year is precisely the period for large-scale slaughter of hogs, it will also suppress the market prices of pork and other livestock products. In the weighting of China's CPI compilation, food accounts for about one-third of the share. This will, through the multi-layered transmission effect of the price system, exert greater downward pressure on China's already sluggish prices, thereby intensifying potential deflation expectations.

However, the employment distribution of the rural population in different regions of China differs greatly. For some provinces in the eastern or central regions with more people and less land, farmers' income comes to a large extent from working outside the home and business operations, and the decline in grain prices may not have such a large impact on their lives; but for remote poor areas in the west and some major grain-producing provinces, the decline in grain prices will deal a blow to agricultural production, which is already meager in profit, and farmers' lives may be greatly affected. Moreover, in recent years the economy has been relatively sluggish, and it has become more difficult for farmers to go to cities to work and do business. In this way, rural problems may become relatively severe.

In the face of the impact of low international grain prices and domestic supply-demand imbalance, the urgent task is to actively take measures to stabilize grain purchase prices and effectively improve the income predicament of farmers in areas hit harder by falling grain prices. On the one hand, all regions should promptly implement the government protective price policy for grain purchasing, effectively curb the situation in which the purchase prices of the three major staple grains have fallen sharply across the board, and effectively safeguard the fundamental interests of grain-growing farmers; on the other hand, because the WTO has certain quota constraints on grain subsidies, it is therefore necessary to vigorously implement the thought of “targeted poverty alleviation,” give strong support to the lower-income groups among farmers mainly engaged in crop cultivation in poor areas, raise the minimum living guarantee and pension standards, improve their living and consumption levels, and effectively maintain social stability in poor areas. In addition, given that potential deflationary pressure has recently surged and the velocity of money circulation is at a relatively low level, a prudent but moderately loose aggregate monetary policy may be implemented, with targeted and precise issuance of agricultural support credit.

From a long-term perspective, as China's agriculture gradually integrates into the wave of globalization, domestic grain prices will gradually approach the low levels of international grain prices, and the pressure of global competition facing China's agricultural sector will also gradually increase. Therefore, raising the level of China's agricultural modernization and international competitiveness, and gradually returning the power to determine grain prices to the market, is the wise choice that conforms to the development of the times. Therefore, at present we should actively learn from the experience of developed countries, and on the premise of respecting farmers' wishes, promote rural land circulation in a standardized and orderly manner, advance the scientific construction of a new socialist countryside, implement large-scale agricultural operations, actively carry out deep processing of agricultural products, and establish efficient agricultural information dissemination channels to resolve the dilemma of information asymmetry between supply and demand sides in different regions, thereby effectively improving agricultural production capacity and the efficiency of agricultural product processing and circulation, ultimately realizing the leap from a large agricultural country to a strong agricultural country, and fundamentally improving the situation of relatively low income among rural residents.

Compared with developed countries, the per capita cultivated land area in China's rural areas is relatively small. In a modern market economy, if farmers are limited merely to intensive cultivation on small plots of farmland, this may alienate into the awkward situation of “too little land hurting farmers,” ultimately evolving into the root cause of poverty in rural areas. Therefore, on the premise of considering their own objective realities, all regions must especially focus on promoting the orderly circulation of rural land management rights, implement large-scale and intensive grain production models, gradually and steadily release rural land and agricultural surplus labor, and develop related industries suited to regional characteristics to effectively absorb high-quality employment of agricultural surplus labor. At the same time, strengthen investment in agricultural science and technology, advance the construction of high-standard modern farmland, effectively improve agricultural labor efficiency and the quality and output of agricultural products, develop modern high-end, intensive, and high-quality large-scale agriculture, and attach importance to carrying out deep processing of agricultural products to enhance the market value chain of agricultural products. When the per capita cultivated area of the agricultural labor force can reach hundreds of mu of land, China's agricultural production efficiency and farmers' income will be greatly improved; and after rural surplus labor, in the orderly process of urbanization, becomes high-end industrial workers through reasonable transfer and related vocational training, their income can also be effectively improved.

In addition, information asymmetry in the supply-demand game is also the key to the current regional and structural surplus in grain supply. In the future, relevant departments can make full use of emerging economic carriers such as “Internet Plus” to optimize agricultural market information transmission channels, reduce the search costs and transaction costs of market entities, establish a modern grain purchasing, sales, processing, and circulation system, effectively bridge the information gaps in the market system, and promote the improvement of the agricultural industry value chain, thereby promoting the integration of agricultural production, processing, sales, and circulation, forming a nationwide market system operating efficiently, and effectively preventing and resolving possible regional backlogs of agricultural products.