Reflections on the Development of the Grain Order Purchasing Model

After the 18th National Congress of the Communist Party of China, the central economic work and rural work made ensuring grain security the top priority of economic work and work related to “agriculture, rural areas and farmers,” and proposed building a new national grain security strategy of “taking self-reliance as the mainstay, basing ourselves on domestic production, ensuring production capacity, importing moderately, and relying on scientific and technological support.” At the Central Rural Work Conference, General Secretary Xi Jinping systematically expounded new judgments, new ideas and new viewpoints on ensuring China's grain security from eight aspects including farmland protection, reserve regulation, use of the market and grain conservation, stressing that the rice bowl of the Chinese people must always be firmly held in our own hands. The Party General Secretary's high degree of attention to grain security and grain work, and the specificity of his arrangements and requirements, are unprecedented. With the development and changes in the situation of grain production and circulation, the grain order purchasing model, as a business approach for achieving linkage between grain production and sales, is increasingly demonstrating its importance and necessity.

Reflections on the Development of the Grain Order Purchasing Model

I. The grain order purchasing model is an effective way to promote grain production

Implementing the order model in the grain production and sales chain is an effective way to raise the level of grain production and sales. It helps guide producers to organize grain production according to market demand, promote the adjustment of the grain planting structure, and develop high-quality grain suited to market demand; it helps implement the principle of high quality at a high price and increase the income of grain-growing farmers; it helps cultivate stable commercial grain bases, give play to the main-channel role of state-owned grain purchasing and selling enterprises and the role of leading enterprises in grain industrialization, and enhance the market competitiveness of grain enterprises; and it helps promote linkage between grain production and sales, achieve a basic balance between total grain supply and demand and in structure, and play a positive role in safeguarding national grain security. In order to further accelerate the development of modern agriculture in our city, advance the adjustment of the internal structure of grain, and raise the level of intensification, standardization and industrialization of the grain industry, the grain and agriculture departments of our city jointly developed the grain production and sales order model, clarified responsibilities, gave play to their respective advantages before, during and after grain production, and worked in coordination to advance grain order work in the grain production and sales chain.

II. Several factors affecting the development of the grain order purchasing model

In the exploration and attempts with the grain order purchasing model in previous years, there was a general feeling that grain orders were “difficult” to operate. The main reasons are as follows:

(1) Diversified purchasing entities, and grain farmers hold an indifferent attitude toward grain orders

With the marketization of grain purchasing and selling, various social entities participate in grain purchasing, competition in the grain market is increasingly fierce, and farmers also have more choices in selling grain. Grain brokers and individual grain traders have the flexibility of buying and selling on the spot, and their requirements for grain quality, especially moisture content, are generally not too high. At present, the way grain farmers sell grain is also changing greatly: after harvesting, they do not dry, clean or haul it home, but sell it directly to grain brokers. Grain of all qualities on the market has “buyers,” which reinforces grain farmers' mentality that “if it is grain, there is no need to worry that no one will want it,” while grain orders have clear requirements for grain quality, so most grain farmers hold an indifferent attitude toward grain orders.

(2) Market trends are hard to predict, and order prices are hard to determine

The market economy is a risk economy. Especially in periods when market prices fluctuate greatly, reasonable pricing cannot be set: if the price is set high, the enterprise will inevitably lose money and may even go bankrupt; if the price is set low, grain farmers will clearly suffer a loss in performing the contract, and they will not accept it; if grain farmers breach the contract, the order becomes a mere scrap of paper. In order to avoid risk, grain order purchasing mostly does not set a purchasing price, while purchasing prices that follow the market in turn make it difficult to determine the contract performance rate of orders. The risk of order purchasing prices relatively restricts the development of grain order purchasing work.

(3) Order purchasing linkages are not close, and breach of contract is hard to claim

At present, in the process of developing order purchasing, state-owned grain purchasing and selling enterprises and leading enterprises in grain industrialization still have a simple buyer-seller relationship. A few leading enterprises in grain industrialization have also implemented grain base orders. Affected by the uneven quality of grain farmers, the investment is large and the results are not ideal. Although protective-price purchasing has been implemented, enterprises and grain farmers have not yet formed a mechanism of sharing benefits and bearing risks together, and grain orders appear relatively loose. Both enterprises and grain farmers have a mentality of wanting to win but not lose, and are unwilling to make the terms of grain order contracts detailed so that they can be exempt from responsibility when there is a breach of contract.

(4) Insufficient order deposits, and grain farmers' interests are hard to realize

The vast majority of funds for grain purchasing by state-owned grain purchasing and selling enterprises rely on loans from the Agricultural Development Bank, and their own purchasing funds are negligible. Grain orders require part of the deposit to be paid to farmers in advance, which increases enterprises' purchasing costs, and grain order deposits are very difficult to put in place. At the time of grain purchasing, the price of grain sold in the early period is generally lower, but as grain prices gradually rise later, grain order farmers suffer losses because grain prices are low first and then high, while farmers who have not signed orders are not bound by constraints, appear free and proactive, and can often sell at a good price, causing grain farmers' enthusiasm for signing contracts to be low.