Behind the Super Rice Crop Failure: Institutional Flaws and the Variety's Own Weaknesses
In mid-April, the media successively published reports on the yield reduction and total crop failure of ten thousand mu of “Liangyou 0293” hybrid rice in Anhui last October, drawing public attention to super rice. Behind this seemingly accidental incident, the flaws of China's agricultural insurance and relief systems are highlighted, and it also reflects various drawbacks of the current management system of China's seed industry.
“Liangyou 0293”: The Variety Itself Has Weaknesses
The incident originated from the fact that last October, rice of the “Liangyou 0293” variety planted in six cities in Anhui - Bengbu, Anqing, Hefei, Chuzhou, Ma'anshan and Huainan - was infected with rice blast, resulting in large-scale yield reduction and total crop failure, with the affected area exceeding ten thousand mu.
After the total crop failure incident, many people believed that “Liangyou 0293” had a great deal to do with Academician Yuan Longping. For this reason, a reporter from China Economic Weekly contacted Yuan Longping's secretary Yang Yaosong at the first opportunity. He said that Teacher Yuan was on a business trip elsewhere and it was not convenient for him to accept an interview, and that “although Yuan Longping is called the father of hybrid rice, the ‘Liangyou 0293’ variety was not bred by him personally.”
According to the official website of the Hunan Hybrid Rice Research Center, the “Liangyou 0293” project was a research achievement of the National High Technology Research and Development Program, namely the 863 Program, hosted by the Hunan Hybrid Rice Center, with Luo Xiaohe and others as the personnel who completed the project, and it was approved as a nationally approved rice variety by the National Crop Variety Approval Committee in 2006 (number: 2006045). According to the approval opinion, this variety is suitable for planting as a single-season middle rice in the rice areas of the Yangtze River basin in Fujian, Jiangxi, Hunan, Hubei, Anhui, Zhejiang and Jiangsu (except the Wuling Mountain area) as well as in areas with mild occurrence of rice blast in the southern Henan rice area.
Regarding the cause of this incident, the conclusions of relevant officials of the Ministry of Agriculture, the seed production enterprise Yuan Longping High-Tech Agriculture Co., Ltd. (hereinafter referred to as “Longping High-Tech”, 000998.SZ), the Wuhe County Agricultural Committee and the Huaishang District Seed Management Station were basically consistent: sustained low temperature and continuous overcast rain, the variety itself being highly susceptible to rice blast, and inadequate timely preventive measures were the main causes of the yield reduction and total crop failure of “Liangyou 0293”.
However, behind the incidental incident there is also the “legacy” of Longping High-Tech's insufficient investment in research and development over many years. Longping High-Tech was founded in 1999, initiated by the Hunan Academy of Agricultural Sciences, and listed on the Shenzhen Stock Exchange in 2000. In 2004, after capital expert Wu Yueshi came in, Longping High-Tech became a privately controlled enterprise. Over the years, the company's business has involved many fields such as pesticides and fertilizers, real estate development, agricultural and sideline product processing, and secondary market investment in securities, yet it has achieved little in seed industry research and development, and many of its flagship products such as “Y Liangyou 1” and “Shen Liangyou 5814” were all purchased from outside (editor's note: in October 2013, China Economic Weekly published an in-depth report on this under the title “The Crisis of the Seed Industry: Not Yet Strong, Already in Excess”).
Chen Zhixin, board secretary of Longping High-Tech, said: “The management is aware of this problem. In recent years the company has exited industries such as real estate and pesticides and fertilizers, further concentrated on its main business, and increased investment in biotechnology breeding for the seed industry. Breeding a variety takes more than 8 years, and starting this year there will be major improvements.”
Since the “Liangyou 0293” variety, which has major defects, is itself susceptible to rice blast, why was it still able to pass the approval of the National Crop Variety Approval Committee? Deng Qiyun, chief scientist of the State Key Laboratory of Hybrid Rice, said that this project passed in 2006, when the national approval test indicators were relatively few; later, elements such as resistance to high and low temperatures and resistance to diseases and pests were added, and a one-vote veto was implemented for varieties whose resistance did not meet the standard.
Resistance refers to the traits a plant possesses to resist adverse environments, such as the ability to resist cold, drought, salt and pests and diseases, and it must withstand market testing. Comparing “Liangyou 0293” and “Y Liangyou 1”, both have a resistance to rice blast of “the highest level 9”, but their market performance is vastly different. In recent years, the nationwide promotion area of “Liangyou 0293” has been less than 500,000 mu, and previously Chuzhou, Hefei, Ma'anshan and many other places reported that this variety was infected with rice blast, whereas “Y Liangyou 1” has a promotion area of more than 8 million mu, ranking first in the country, yet the market has never reported any occurrence of rice blast infection.
On April 13, Longping High-Tech issued an explanatory announcement stating that the company decided to stop selling “Liangyou 0293”, which has “an average rice blast rating of level 5.6, a maximum of level 9, and a resistance frequency of 80%”.
The Institutional Flaws Behind the Incident: The Market Calls for a Risk Diversification Mechanism and a Seed Variety Registration System
According to on-site field identification conducted by the Anhui Provincial Agricultural Committee and other departments, the important cause of the yield reduction and total crop failure of the “Liangyou 0293” rice seed was natural disaster. It is understood that the claim settlement funds of Guoyuan Insurance Company, which undertook the claims for this yield reduction and total crop failure incident, have now basically been put in place. Among them, the claim settlement amount for total crop failure is more than 200 yuan/mu, while for yield reduction it depends on the situation, with compensation amounts ranging from several dozen yuan to more than 100 yuan/mu. Adding government subsidies, the farmers whose crops failed completely this time can receive no more than 350 yuan/mu. Relative to an output value of more than 1,000 yuan per mu, the claim settlement and subsidy amount of no more than 350 yuan/mu is on the low side, and the affected farmers find it difficult to bear the losses.
The “Statistical Communique of the People's Republic of China on the 2014 National Economic and Social Development” released by the National Bureau of Statistics shows that in 2014 the total area of crops affected by disasters was 24.89 million hectares, of which 3.09 million hectares suffered total crop failure, and direct economic losses of 12.9 billion yuan were caused by low-temperature freezing and snow disasters. Who will bear such huge losses?
In fact, China's agricultural insurance system faces problems such as insufficient government intervention, insufficient effective demand, a lack of professional insurance practitioners, a limited variety of agricultural insurance products, and farmers' low awareness of purchasing insurance. China's agricultural insurance process is slow and there are systemic risks.
Tuo Guozhu, a professor at Capital University of Economics and Business, said that because natural disasters may cause huge losses, it is difficult for insurance companies to bear them alone, and the key lies in a sound catastrophe risk diversification mechanism. Taking government intervention as an example, developed countries generally give a certain proportion of subsidies on premiums, such as 30% in the United States, 50% in Canada, 50%-60% in Japan, 20%-50% in Spain, and 56% in the Philippines.
Longping High-Tech, deeply mired in the vortex, also showed its sincerity, as the company plans to establish a post-disaster relief fund for the seed industry, intending to set aside a certain proportion of funds from annual profits into the fund to provide relief to farmers suffering from natural disasters. Longping High-Tech board secretary Chen Zhixin said that Longping High-Tech does not bear compensation liability for the yield reduction and total crop failure, but out of humanitarianism it will give farmers a certain amount of compensation.
The party involved, Longping High-Tech, is excluded from compensation liability. According to experts, this is because in accordance with the relevant spirit of China's current Seed Law, as long as a variety has passed the approval of the National Crop Variety Approval Committee, the enterprise producing and selling the seeds does not need to bear liability in the face of force majeure.
“Various domestic research institutes and seed companies, large and small, are scrambling for variety approval. Behind this, apart from the reason of profit, the most important thing is the shield of ‘exemption from liability’. If this ‘unspoken rule’ is not changed, our industry's being responsible for agricultural production and farmers will be an empty phrase.” Liu Shi, who once served as president of several seed companies, suggested gradually transitioning from the “variety approval system” to a “variety registration system”, so as to conform to the laws of market-oriented development.
In short, the “variety registration system” is a system in which the seed management department is only responsible for reviewing whether the information and materials provided by seed companies have fulfilled the information disclosure obligation, similar to the securities issuance registration system.
Those who hold the view of a “variety registration system” also include Tong Pingya, a seed industry expert at the Chinese Academy of Agricultural Sciences, and Zhang Shihuang, chief scientist of the National Corn Industry Technology System, among others. At this year's National Two Sessions, the “Three Rural Issues” Committee of the Revolutionary Committee of the Chinese Kuomintang submitted the “Proposal on Reforming China's Current Seed Industry Management System and Making the National Seed Industry Bigger and Stronger”, taking advantage of the upcoming revision of the Seed Law to reduce administrative licensing procedures, reform the current major crop variety approval system, and adopt the variety registration system commonly used in the world, so that enterprises truly take responsibility for the market and farmers.