China's grain output, imports and stocks all rising at once: what new problems does this pose?

In 2014, China's annual grain output achieved an “11th consecutive increase”, basically remaining above 600 million tons, and at the same time, China's grain imports also grew rapidly. The reporter learned that over the whole of last year, China's grain imports exceeded 100 million tons for the first time, while according to data released by the General Administration of Customs on the 8th, in the first 7 months of 2015 China imported 72.568 million tons of grain, up 22.4% year on year. While grain output and imports both “increased”, China's total grain stocks in recent years also reached a historic high, with varieties such as corn suffering serious backlogs and inventory pressure becoming prominent. China's grain has shown the strange phenomenon of production, imports and stocks all “rising together”.

Some experts point out that the surge in grain imports is not because domestic grain is insufficient to eat, but rather the ever-widening price gap between domestic and foreign grain is an important reason for China's grain showing the “three quantities rising together”. Since 2012, domestic grain prices began to gradually rise above the international market. By June this year, China's late indica rice was 51% higher than the duty-paid price of Thai rice, while wheat and corn were on average 56% and 65% higher than international market prices respectively. Faced with such a huge price gap, grain processing enterprises naturally prefer to purchase low-priced foreign grain and correspondingly reduce their purchases of domestic grain, thus causing domestic grain stocks to keep growing.

⟦NL> Because domestic agricultural production costs have kept climbing in recent years, in order to raise farmers' enthusiasm for growing grain, the state raised the minimum purchase price year by year, while international grain prices have continued to fall in recent years. At the same time, factors such as the appreciation of the RMB exchange rate and the decline in grain freight rates caused by the plunge in global energy prices jointly created a grain price inversion between domestic and foreign markets and between the production and processing sectors.

Chen Xiwen, deputy head of the Central Rural Work Leading Group and director of its office, said that output, imports and stocks all increasing at the same time has become a new problem facing China's grain, and urgent attention is needed; if this phenomenon is allowed to develop, it will have an adverse impact on the healthy development of China's agricultural industry, farmers' employment and farmers' income growth.

At present, the mechanization rate of sowing and harvesting in China's agricultural production and the contribution rate of agricultural science and technology are rising year by year, but because China has many farming households and small operating scales, agricultural labor productivity still lags far behind that of developed agricultural countries. Some experts suggest that if Chinese agriculture wants to become strong, it must take the path of modern agriculture, develop appropriately scaled operations through institutional innovation, and reduce agricultural production costs by raising scale efficiency and the level of science and technology, thereby escaping the predicament of the “three quantities rising together”.