Lowered Temporary Corn Reserve Price: Farmers Should Not Bear the Entire Pain of Reform

Reform is necessary, and adjustment is necessary, but the pain of reform and development cannot be borne entirely by farmers. Grain is, after all, a special commodity; when farmers grow grain, it is itself a responsibility and contribution to national food security, and the cost of market fluctuations cannot be paid entirely by farmers. At present, how to safeguard the interests and enthusiasm of grain-growing farmers is crucial.

Currently, corn in the three northeastern provinces and Inner Mongolia, the country's major grain-producing areas, is gradually entering maturity from south to north, yet farmers who see a bumper harvest in sight cannot feel happy. Not long ago, the National Development and Reform Commission, the State Administration of Grain, the Ministry of Finance, the Agricultural Development Bank of China and other departments jointly issued a notice: the listed purchase price for national temporary storage corn was set at 1 yuan per jin, which is at most 0.13 yuan lower per market jin than last year's temporary reserve price, and is also the first decline in the temporary reserve price since the state introduced the corn temporary reserve policy in 2008.

After rising for seven consecutive years, the first cut was such a large one, which was both unexpected and reasonable. Since 2008, under the protection and market support of the corn temporary purchase and storage policy, farmers' enthusiasm for growing corn was greatly mobilized, the planting area continued to expand, output rose year after year, and corn prices also climbed all the way. In 2008, the temporary purchase and storage price was only a little over 7 mao per jin, but by 2014 it had surged to 1.13 yuan, an increase of nearly 60%.

However, in contrast to the one-way rise in domestic corn prices, international market prices had been declining for 3 consecutive years. Before the cut, the difference between the corn import price and the domestic temporary reserve price had already reached about 600 yuan per ton. This directly led to two consequences: first, corn imports surged; second, corn inventories soared. With “foreign grain entering the market and state grain entering warehouses,” some major producing areas saw a situation in which grain “cannot be purchased, cannot be stored, cannot be sold, and cannot be subsidized by finance.”

It can be said that this year's relatively large reduction in the corn temporary reserve price is both the natural result forced by the market and an inevitable choice for industrial adjustment. Bringing the temporary reserve price level as close as possible to the market, enabling the market to play a decisive role in resource allocation and enabling the government to play its role better, and guiding grain prices back to the market. This is conducive to encouraging feed and deep-processing enterprises and other diverse market entities to purchase more grain, store more grain, and use more grain, and is conducive to promoting the long-term healthy development of the domestic corn industry; it can also release a signal, reasonably guide market expectations, and actively and steadily guide the adjustment of the agricultural planting structure; for farmers, it is also a profound training in market awareness and education in the spirit of risk, because there is no market that only rises and never falls.

But at the same time, we must also see that the relatively large reduction in the corn temporary reserve price has a very real impact on farmers' interests. In recent years, as grain prices rose, planting costs also continued to climb. The prices of agricultural inputs, labor, and especially transferred land were to a large extent based on last year's grain prices. Now that the purchase and storage price per jin has been lowered by 0.13 yuan, the impact on farmers, especially large-scale growers, can be imagined. Adjusting structure and changing crops and systems is a process of reform, and for the time being farmers will find it hard to adapt, and there will still be many difficulties in the short term. Reform is necessary, and adjustment is necessary, but the pain of reform and development cannot be borne entirely by farmers. Grain is, after all, a special commodity; when farmers grow grain, it is itself a responsibility and contribution to national food security, and the cost of market fluctuations cannot be paid entirely by farmers. At present, how to safeguard the interests and enthusiasm of grain-growing farmers is crucial.

The purchase and storage price has been set. The key is to ensure that grain can be sold, sold smoothly, and sold well. According to policy, the implementation period for this year's corn temporary reserve purchase was adjusted to November 1, 2015 to April 30, 2016, with the start time about 20 days earlier than in previous years. This is conducive to farmers selling grain promptly after harvest, and also to making full use of drying capacity and minimizing corn mildew. At the same time, the purchase and storage entities also added AVIC Industry Group alongside COFCO Group and Chinatex Corporation as supplementary forces to Sinograin, which is conducive to expanding warehouse capacity and the pace of purchase and storage. Preparatory work must be done strictly in accordance with policy requirements, ensuring that funds and equipment are in place and that operations start on time, and strictly preventing grade depression, price depression, and the issuance of IOUs to farmers. Regarding possible quality problems such as corn mildew, it is necessary both to strictly implement purchase quality standards and for all localities to promptly prepare specific work plans for the purchase and disposal of substandard grain and launch them in due course, so as to ensure that farmers do not face “difficulty in selling grain.” At the same time, it is also necessary to actively mobilize feed and deep-processing enterprises and other diverse market entities to participate in purchasing.

During the period of adjustment and transformation, in the face of the goals of reform and the need to safeguard food security and farmers' interests, first, investment in agricultural infrastructure and agricultural scientific and technological support must be increased, the comprehensive grain production capacity must be continuously raised, and the red line of 1.8 billion mu of arable land must be strictly guarded; no matter how adjustments are made, grain production capacity must not be adjusted downward. Second, for some farmers who change crops and systems, subsidies and various forms of support must be increased. Third, under the premise of guarding against risks, financial support for new types of business entities and large grain growers must be increased, so as to avoid problems in their capital chains that affect the next season's production. In short, new levers and new platforms for strengthening agriculture, benefiting farmers, and enriching farmers must be continuously created.

At the same time, all localities can also proceed from immediate realities and explore ways to provide farmers with some effective support in other links. For example, difficulty in drying grain is a common problem for farmers. Parking lots, basketball courts, cultural squares and other such places in rural areas can be put to use and provided to farmers as temporary grain-drying sites. For some large grain growers with the ability and foundation, subsidy efforts can be increased to help them purchase drying equipment, or cooperatives can be used as a vehicle to provide drying services to farmers. In addition, every grain-selling season is the time when business entities pay land rent to farmers and clear off credit accounts for agricultural inputs. At such times, providing them with necessary financial support can prevent them from turning to usury or selling grain cheaply at a low price. For some customers with a good credit record on bank loans, repayment periods can also be appropriately extended to prevent overdue repayment from affecting credit, and so on.

From the perspective of long-term development, although the current corn purchase and storage price has been substantially lowered, it is still considerably higher than the international market price. China's corn harvests have been abundant for years, inventories have continued to increase, and the pattern of periodic supply exceeding demand has further intensified. Market demand remains weak, which has suppressed the trend of corn prices, and downward pressure on corn prices in the future remains relatively large. In this regard, farmers must have sufficient market expectations and preparations and adjust their planting structure in due course. But what to plant after adjustment is also a problem. Government departments in major grain-producing areas must do a good job of effective guidance and service, both adjusting and avoiding blindness, while also focusing on the long term and vigorously cultivating new supporting forces upstream and downstream of the industry. The formulators and executors of relevant policies must also fully consider farmers' capacity to bear burdens, and must both continue to advance reform and achieve a smooth transition. On the basis of comprehensively considering the interests and wishes of market entities in all parties, they must always persist in placing farmers' interests in an important position.

Only in this way can the overall situation of China's food security be safeguarded, and only then can we look forward to the corn market truly moving toward maturity after experiencing the pain of reform.