In China's grain sector, foreign goods are entering the market while domestic goods go into storage, with a huge price gap between domestic and international markets
Domestic production and inventories are growing, and imports are also climbing
All three are rising together - is there too much grain or too little?
By our reporter Feng Hua
This year China's summer grain achieved a “twelfth consecutive bumper harvest.” Last year, China's grain production remained stable above 1.2 trillion jin for two consecutive years. At the same time, grain imports exceeded the 100 million ton mark for the first time. In the first 7 months of this year, 72.568 million tons of grain were imported, up 22.4% year on year. This leaves many people puzzled: why, when grain output has risen for years in a row, do imports keep climbing?
China's grain sector shows the phenomenon of production, inventories and imports all rising together - the “three quantities rising in unison.” Why has this situation arisen? Is there too much grain or too little? How can the adverse effects of the problem be resolved? The reporter interviewed a relevant official of the Ministry of Agriculture and related experts on this.
Variety adjustment and the huge domestic-international price gap lead to increased imports
A relevant official of the Ministry of Agriculture said that variety adjustment and lower international grain prices are the main factors behind the climbing import volume. In recent years, the bulk of China's imports has been soybeans, which are in short supply domestically, mainly to meet the growing demand for edible vegetable oil and protein feed. Last year soybean imports reached 71.4 million tons, up 12.7% year on year. At the same time China also imported some cereal varieties, with net imports of more than 18.7 million tons, up 38% year on year, mainly barley and sorghum, used for brewing and feed.
“The increase in imports does not mean our grain is insufficient to eat; it is mainly caused by the huge price gap between domestic and international grain.” Ye Xingqing, director of the Rural Economy Research Department of the Development Research Center of the State Council, explained that since 2004, China has implemented the minimum purchase price and temporary storage policies, thereby raising farmers' enthusiasm for growing grain and stabilizing grain production. As purchase prices gradually rose, domestic grain market prices rose accordingly. But in recent years international market grain prices have turned downward, and the inversion of domestic and international agricultural product prices has become increasingly obvious. Since 2012, domestic grain prices have gradually risen above the international market.
At present, the prices of bulk agricultural products in China are comprehensively higher than on the international market. By the first half of this year, the prices of staple grains such as rice, wheat and corn all exceeded international market prices by 50%, and the duty-paid import price of bulk agricultural products such as grain, cotton, oil and sugar was roughly 1000 yuan per ton lower than domestic prices, leading to continuously increasing imports of grain, cotton, oil and sugar and giving rise to the phenomena of “importing while stockpiling” and “foreign goods entering the market while domestic goods go into storage.”
The “three quantities rising in unison” reflects the weak competitiveness of China's agriculture
“The phenomenon of ‘three quantities rising in unison’ is a new situation emerging under the new normal. There is an inevitability to its emergence; some varieties in domestic short supply genuinely need to be imported, but the fundamental reason is still that international competition is becoming increasingly fierce and China's agricultural competitiveness is weak.” A relevant official of the Ministry of Agriculture said that China's tariff level on agricultural products is only 1/4 of the world average, making it one of the countries with the highest degree of agricultural openness in the world. As opening up continues to deepen, especially with the construction and development of free trade areas between China and ASEAN, New Zealand, Australia and others, the domestic market and the international market will become further integrated, and the degree of agricultural openness will rise even further.
“In the future we will face not only competition from developed countries with abundant agricultural resources and a very high level of agricultural modernization, but also competition from developing countries with obvious labor advantages. Yet the production cost of domestic agricultural products is still on an upward track, with land rent, labor costs and machinery operation fees continuously rising, and agricultural products such as grain lacking a price advantage.” the official said.
Li Guoxiang, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences, said that falling international agricultural product prices and rising import volumes increase the pressure on domestic grain inventories. This forms a huge shock to China's market and will directly narrow the room for domestic price increases. Domestic agricultural production will further face the double squeeze of a price “ceiling” and a cost “floor,” with comparative returns declining. If allowed to develop unchecked, farmers' enthusiasm for growing grain and national food security would be deeply affected, and it would have an adverse impact on the healthy development of China's agricultural industry, farmers' employment and farmers' income growth.
The fundamental way lies in accelerating the transformation of China's agricultural development mode
Is there a way to crack the “three quantities rising in unison”?
“The fundamental way is to unswervingly accelerate the transformation of the agricultural development mode.” A relevant official of the Ministry of Agriculture said that the key is to achieve the “three transformations” in direction, namely to push agricultural development from being mainly about quantity growth to giving equal weight to quantity, quality and efficiency; from mainly relying on input of material factors to relying on scientific and technological innovation and raising the quality of the workforce; and from extensive management dependent on resource consumption to sustainable development. The focus should be on five aspects: “expanding scale, adjusting structure, strengthening industry, sustainability, and raising quality.”
Expanding scale means cultivating new types of entities, improving the service system, and accelerating the development of appropriately scaled operations. We should actively guide and support the growth and expansion of new types of operating entities such as large growers and breeders, family farms, farmers' cooperatives and leading enterprises, strive to improve the agricultural socialized service system, and raise the scale efficiency of production.
Adjusting structure means facing market demand, giving play to resource advantages, and accelerating the adjustment of the agricultural structure. We should scientifically examine the potential of domestic agricultural resources and rationally arrange the order of priority for agricultural product production. We must resolutely protect arable land, ensure the level of self-sufficiency in staple rations, and achieve “storing grain in the land” and “storing grain in technology” so as to ensure food security. Thereby, we should promote the coordinated planning of grain, cash crops and feed, the integration of planting, breeding and processing, and the combination of agriculture, forestry, animal husbandry and fisheries, achieving coordinated development.
Strengthening industry means improving the industrial chain, ensuring quality and safety, and accelerating the improvement of the comprehensive efficiency of agriculture. With an eye to promoting the integrated development of the primary, secondary and tertiary industries, we should vigorously advance industrialized agricultural operation, accelerate the development of deep processing of agricultural products, extend the industrial chain, and increase the returns of the entire agricultural industrial chain.
Sustainability means strengthening resource protection, enhancing ecological development, and accelerating the promotion of sustainable agricultural development. We should intensify protection of resources such as arable land and water; gradually reduce the use of chemical fertilizers and pesticides; develop ecological agriculture, green agriculture and circular agriculture, promote the resource utilization of agricultural waste such as straw, livestock and poultry manure, and plastic film, and turn waste into treasure through comprehensive utilization.
Raising quality means advancing scientific and technological innovation and infrastructure construction, cultivating professional farmers, and accelerating the realization of innovation-driven agricultural development. We should vigorously advance agricultural scientific and technological innovation and promote the transformation and application of agricultural scientific and technological achievements. We should strengthen water conservancy construction, raise the effective irrigation rate of farmland, accelerate the transformation of medium- and low-yield fields, and continuously improve comprehensive grain and agricultural production capacity, among other things.
Li Guoxiang suggested that in response to the “three quantities rising in unison,” agricultural support and protection policies should be adjusted, letting the market play a greater role, minimizing the distortion of the market by price support policies, and reversing the price inversion phenomenon. At the same time, smuggling of agricultural products such as grain should be severely cracked down on, to better safeguard market stability and protect farmers' interests.