The temporary state reserve policy for rapeseed has reached a crossroads: which way will it go?

Under the current temporary state reserve policy for rapeseed, all the various costs and even losses incurred from purchasing and processing to storing and selling rapeseed are ultimately borne entirely by the state. As the quantity of rapeseed in temporary state reserve continues to increase, the state's fiscal burden grows heavier and heavier.

In late May, the very season when rapeseed harvest begins in the south, oil processing enterprises in the main rapeseed-producing areas were generally facing operational difficulties. When a reporter from Economic Daily interviewed a large oil processing enterprise in Jingzhou, Hubei Province, they saw that more than 10 oil tanks were filled with temporarily reserved oil, while the enterprise was in a state of shutdown due to operational difficulties. Once a well-known local brand oil processing enterprise, it can now only survive by collecting, processing and storing rapeseed oil on behalf of others, earning processing subsidies and storage fee subsidies. When the head of this enterprise was interviewed by the reporter, a note of anxiety could be heard in his voice.

During this survey, the reporter interviewed many people in the industry, who generally expressed concern about the difficulties facing the development of the domestic rapeseed industry. The inversion of domestic and international rapeseed prices is the primary problem currently facing oil processing enterprises. China has implemented the temporary state reserve policy for rapeseed for many consecutive years, effectively protecting farmers' enthusiasm for planting rapeseed and promoting the development of rapeseed production. But in recent years, because the edible oil market has remained weak and international rapeseed prices have continued to fall, domestic rapeseed prices have stayed at a high level and are far higher than international prices. Because of the inversion between domestic and international prices and the inversion between purchase and sale prices, domestic oil processing enterprises find it difficult to carry out self-operated purchases, and most rapeseed enters temporary state reserve purchasing and, after being processed into rapeseed oil, becomes state inventory.

At the same time, under the current temporary state reserve policy for rapeseed, all the various costs and even losses incurred from purchasing and processing to storing and selling rapeseed are ultimately borne entirely by the state. As the quantity of rapeseed in temporary state reserve continues to increase, the state's fiscal burden grows heavier and heavier.

Moreover, at the Jingzhou grain and oil wholesale market in Hubei, the reporter also saw large quantities of edible oil processed from imported soybeans. Although the state stipulates that imported rapeseed oil cannot enter the main rapeseed-producing areas, large amounts of imported soybean oil have entered the markets of the main rapeseed-producing areas, greatly affecting the rapeseed oil market. On one side, large quantities of domestic rapeseed oil are being put into oil tanks; on the other side, large quantities of low-priced foreign oilseeds are entering the country. Imported soybeans have exceeded 70 million tons, and rapeseed imports have been rising year by year: last year rapeseed imports reached 5.081 million tons, up 38.7% year on year.

Chen Yanjun, a senior analyst at the Zhengzhou grain wholesale market, believes that the temporary state reserve policy has played a certain role in protecting farmers' planting returns. However, the temporary state reserve policy has pushed up domestic rapeseed prices, raising the operating costs of domestic oil processing enterprises and stimulating imports of low-priced foreign rapeseed, so the market share of domestic rapeseed and rapeseed oil has further shrunk as a result.

Kang Xia, associate researcher at the Academy of State Administration of Grain Science Research, believes that this price mechanism is disconnected from the international market, and because of the lag in policy, the policy lacks flexibility and cannot adapt to current changes in international and domestic markets. China's oilseed market is becoming more and more closely linked with the international market, and the influence of the international market on the domestic market is growing. How rapeseed purchasing policy can adapt to changes in domestic and international markets is a major problem currently facing the rapeseed industry.

Experts suggest that the state could follow the approach of the target price subsidy policy piloted for two major agricultural products, soybeans and cotton, and pilot this policy in Hubei and some main rapeseed-producing areas. In this way, the market would be returned to enterprises while also protecting the interests of rapeseed growers. However, some enterprise heads said that over many years the domestic rapeseed industry has already become dependent on the temporary state reserve policy, and any adjustment or change in the temporary state reserve policy will affect the nerves of all kinds of enterprises along the industrial chain. Even if the temporary state reserve policy is adjusted, there will still be a long period of policy inertia. The government must strengthen top-level design and create a fair policy environment so that large-scale, reputable brand enterprises can fully leverage their competitive advantages.

In fact, before this, China had implemented for a period a purchasing method of “market-support purchasing + state subsidies + enterprise self-operation.” This method of purchasing and storage meant that, in addition to Sinograin as the main body executing rapeseed purchasing, multiple entities such as COFCO, Chinatex and leading local oil processing enterprises were also introduced to jointly participate in market-support purchasing. The central finance gave entrusted enterprises a one-time subsidy of 0.1 yuan per jin and no longer bore any other costs. After processing the purchased rapeseed into rapeseed oil, enterprises sold it on their own and were responsible for their own profits and losses. However, after being implemented for a period, this purchasing method was canceled for various reasons.

“This purchasing method opened up a new approach to policy-oriented grain purchasing and storage, organically combining state policy guidance with market mechanisms. It not only mobilized farmers' enthusiasm for planting rapeseed, but also helped domestic oil processing enterprises obtain sufficient processing raw materials and ensured market supply. In addition, the state bore only a one-time subsidy, which reduced the state's fiscal burden.” Gong Wei, director of the Policy and Regulation Division of the Hubei Provincial Grain Bureau, said in an interview.