China's domestic grain demand will reach 1.4 trillion jin in five years

Data: 2014 grain imports exceeded 100 million tons for the first time

“From the perspective of the domestic production situation, this year marks the 12th consecutive year of grain output growth, with production expected to reach about 1.23 trillion jin.” Chen Xiwen, deputy head and director of the office of the Central Rural Work Leading Group and deputy director of the office of the Central Financial and Economic Leading Group, pointed out at the recently held “2016 Finance Annual Conference” that compared with 12 years ago, this year's annual output has increased by more than 360 billion jin.

This is a remarkable achievement. Data shows that during the “12th Five-Year Plan” period, China's modern agriculture development accelerated, comprehensive agricultural production capacity reached a new level, grain production climbed two 100-billion-jin steps in 5 years, and total grain output in 2014 reached 1.2142 trillion jin, remaining stable above 1.2 trillion jin for two consecutive years.

However, behind the “12 consecutive increases” in grain output, the reality of “grain shortage in a bumper year” cannot be concealed. Customs data shows that in recent years, grain imports have increased year by year. In 2014, China's grain imports exceeded 100 million tons for the first time. In recent years, China's three major grain varieties - rice, wheat and corn - have also seen net imports for 4 consecutive years, while imports of corn substitutes such as sorghum and DDGS (distillers dried grains with solubles) have also grown substantially in recent years.

Han Changfu's article states that with the increase in total population, the rise in the proportion of urban population, the improvement of residents' consumption levels and the expansion of industrial uses of agricultural products, China's demand for agricultural products is showing a rigid growth trend. According to expert forecasts, by 2020 China's grain demand will be about 1.4 trillion jin, leaving a gap of about 200 billion jin.

“The 200 billion jin grain gap should mainly be a gap in feed grain, especially specialized feed grain.” Zhang Zhaoxin, director and researcher of the Industry and Technology Research Office of the Rural Economy Research Center of the Ministry of Agriculture, said that while China is a major grain-producing country, it is even more a major grain-consuming country with high rigid demand.

This view is shared by Li Guoxiang, deputy director of the Rural Development Institute of the Chinese Academy of Social Sciences. In his view, by 2020, it will be no problem for China's grain production capacity to reach the level of 1.4 trillion jin. In particular, with the improved production capacity of major grains, a relaxed state can guarantee China's absolute grain security.

Analysis: Non-staple grain varieties can rely on imports

The Chinese people's rice bowl must always be held firmly in their own hands, and China's rice bowl must be filled with Chinese grain. The “13th Five-Year Plan” proposal puts forward adhering to the strictest farmland protection system, holding the red line for farmland, implementing the strategy of storing grain in the land and in technology, improving grain production capacity, and “ensuring basic self-sufficiency in grains and absolute security of staple food”.

This differs somewhat from the formulation in the central “12th Five-Year Plan” proposal, which called for “taking safeguarding national grain security as the primary goal” and “implementing the national plan for adding 100 billion jin of grain production capacity”. This means that during the “13th Five-Year Plan” period, after ensuring the security of major grains and staple food, some grain can rely on imports.

Han Changfu's article points out that it is necessary to focus on coordinating both domestic and international markets and both types of resources. Appropriately increase imports of agricultural products according to domestic needs, strengthen regulation of agricultural product imports and exports, properly grasp the scale and pace of agricultural product imports, actively support exports of competitive agricultural products, and achieve effective allocation of domestic and international resources and coordinated use of domestic and international markets.

Ye Xingqing, director and researcher of the Rural Department of the Development Research Center of the State Council, pointed out that this is in fact seeking space for China to free its hands in adjusting structure and transforming modes. In the new grain security strategy proposed by the central government, “moderate imports” are an important component, and this is a major strategic measure for building a new open economic system.

The article also points out that it is necessary to advance agricultural opening-up, strengthen agricultural external cooperation, seize the major opportunity of “Belt and Road” development, and accelerate the cultivation of internationally competitive agricultural enterprise groups. Li Guoxiang said that some “Belt and Road” countries are not agriculturally developed, while China has obvious advantages in technology and management and can help improve the agricultural science and technology level and competitiveness of countries along the route, with huge room for cooperation.

Way out: Cultivate a group of internationally competitive grain enterprises

In Li Guoxiang's view, China's strategy for ensuring grain security lies in improving China's agricultural competitiveness. “Under normal circumstances, some grain can be solved through imports. But considering extreme situations, China's grain production capacity must be restored in a timely manner to ensure sustainable development and strength of resources, so that some farmland can implement crop rotation and fallow.”

Ye Xingqing pointed out that during the “13th Five-Year Plan” period, China's agricultural policy system should shift from an output-increase orientation to a competitiveness orientation, and the agricultural policy system should be restructured with improving competitiveness as the core. He suggested that promoting land transfer and concentration, cultivating new types of business entities, and improving agricultural labor productivity should be made the core goals of the next stage of the agricultural policy system. Regarding agricultural product prices, pilot reforms for target price subsidies for agricultural products should be carried out with “market pricing and separation of price and subsidy” as the core.

At present, low- and medium-yield farmland accounts for 2/3 of China's cultivated land area, and effective irrigation area accounts for only a little more than half, so the situation of relying on the weather for food has still not fundamentally changed. Han Changfu requires that large-scale land improvement, transformation of low- and medium-yield farmland and construction of high-standard farmland be advanced, and that by 2020, 800 million mu of high-standard farmland be built.

In addition, in recent years the contribution of agricultural science and technology to grain output increase has risen year by year. At present, the contribution rate of agricultural scientific and technological progress has reached 56%, more than 10 percentage points higher than 10 years ago, but there is still a large gap compared with developed countries. Han Changfu pointed out that the structure of fiscal expenditures supporting agriculture should be optimized, with key support for agricultural infrastructure construction, agricultural structural adjustment, sustainable agricultural development, agricultural scientific and technological progress, and innovation in agricultural business methods.

Zhang Keran, an analyst in the agriculture, forestry, animal husbandry and fishery industry at Huarong Securities, believes that in the long run, cultivating a group of internationally competitive grain enterprises will help grasp pricing power in the international grain and oil market, and only then can the grain security issue be fundamentally resolved. Investors are advised to pay attention to leading enterprises in grain and oil industrialization.