Will agricultural subsidies favor grain growers? There are more policy adjustments to come
From the “target price” subsidy pilot program, to the integration of the “three subsidies” (improved seed subsidy, direct grain-growing subsidy, and agricultural input subsidy) into the “agricultural support and protection subsidy,” and then to the adjustment of fishery fuel price subsidies. At China's central level, agricultural subsidy policy is undergoing a series of major reforms.
According to an expert close to the Ministry of Agriculture, there are currently more than 50 types of agricultural subsidy programs at China's central level, and in the next round of agricultural subsidy policy reform, the vast majority of agricultural subsidy policies will undergo vigorous reform and adjustment. The “target price” subsidy that the industry is watching will be extended from soybeans and cotton to the three major staple grains, while the integrated pilot of the “three subsidies” will be implemented nationwide in 2016.
⟦NL> At present, China's agricultural subsidies basically operate under a “general preference” system, and the general direction of the next round of reform will be to favor large-scale grain growers, skilled grain growers and other new types of agricultural business entities. Simply put, only whoever farms the land and grows the grain will receive state subsidies. It is not like now, where as long as someone has contracted cultivated land in rural areas, they can enjoy all kinds of farming and grain-growing subsidies.
However, judging from the “target price” subsidy pilot program launched last year by the relevant departments for cotton and soybeans, and the integrated “three subsidies” pilot implemented this year, the new agricultural subsidy reform also has some problems and contradictions. The contradiction of the “target price” subsidy lies in the fact that, in theory, the direction of reform is quite right, but in practice it is very difficult to operate, and it even raises the cost of subsidies; the problem brought about by integrating the “three subsidies” is that many farmers who hold contracted land have begun planning to raise agricultural land rents.
The aforementioned expert close to the Ministry of Agriculture analyzed and said that although both types of pilot reforms, the “target price” subsidy and the integrated “three subsidies,” have produced some contradictions and problems, the overall direction of agricultural subsidy reform, favoring large-scale grain growers, favoring new types of agricultural business entities, and favoring scale management, is correct. In the future, it will still be necessary to accumulate experience from some pilot areas before carrying out major reforms to the entire agricultural subsidy policy.
The drawbacks of the “general preference” system
At present, the various subsidy policies implemented by the central government for agriculture are mainly carried out in the form of a “general preference” system. For example, since 2002, the state has successively implemented the improved seed subsidy, direct grain-growing subsidy, comprehensive agricultural input subsidy and agricultural machinery purchase subsidy (referred to as the “four subsidies”), and since 2004, it has successively introduced the minimum grain purchase price and the temporary storage policy for major agricultural products (referred to as the “market support policy”). These policies have all played a relatively large role in raising farmers' incomes.
Minister of Agriculture Han Changfu said at the 2014 National Two Sessions that in 2013 alone, for the “four subsidies” alone, the central government's direct subsidies to farmers reached more than 160 billion yuan. And in implementing the “market support policy,” the various subsidy-type payments made by the central government to grain-growing and land-farming farmers and to rural breeders totaled an even more enormous amount. If the many other types of agricultural subsidies under various names are added, central government subsidies to agriculture now exceed 1 trillion yuan each year.
After more than ten years of implementation, the “four subsidies” and the “market support policy” have now exposed many contradictions and problems. The main problem with the “four subsidies” policy is that as long as farmers hold policy-based contracted land, regardless of whether they farm the land or grow grain, they can basically receive about 90 yuan per mu per year in state subsidies. The result is that some farmers take the subsidy and then turn around and go to the city to work, while those who farm grain on rented land cannot enjoy grain-growing and land-farming subsidies.
The contradiction that has emerged with the “market support policy” is that the state raises the minimum purchase prices of major agricultural products year after year. Now the prices of major agricultural products in China, including two of them, are far higher than international prices, while the grain held in state reserves cannot be sold for various reasons, causing the entire domestic grain market to become distorted, grain and oil processing enterprises to complain incessantly, and the state finances to suffer severe losses as a result.