Too Much Grain in Reserve? Committee Member Rebuts: If Production Is Cut and Prices Rise, We Will Regret It Too Late
As a major agricultural country, China cannot avoid the issue of food security. Due to China's minimum purchase price policy, wheat and rice stocks are overflowing. This is a microcosm of the “eleven consecutive years of increase” in total grain output. However, the fact that some domestic grain prices are higher than those abroad has prompted a continuous increase in grain imports.
Faced with a stock-to-consumption ratio higher than the international norm, as well as the fiscal burden brought by the stocks, this provided fertile ground for the spread of the claim that “China has too much grain.” During the 2015 National Two Sessions, Chen Zhangliang, a member of the National Committee of the Chinese People's Political Consultative Conference and vice chairman of the China Association for Science and Technology, said in an exclusive interview with China Business News that one cannot only see the overflowing granaries while ignoring the increase in grain imports.
Chen Zhangliang said that China's agricultural strategy should be to reduce production costs and improve competitiveness, rather than simply thinking that when the granaries are full, production should be cut back. That is actually very dangerous.
Full Granaries Must Not Blind Us to Rising Imports
China Business News: China has achieved eleven consecutive years of increase in total grain output, and some say “there is too much grain.” How do you view this claim? Does China have too much grain, or too little?
Chen Zhangliang: Since the founding of the People's Republic of China, there has been a pattern in grain production: after every three to five years of growth, grain output declines. This is the result of a combination of factors including natural climate and policy. Put simply, every time there is too much grain, it is not taken seriously, and then coupled with natural disasters, grain output falls.
The “eleven consecutive years of increase” is related to the stability of grain prices and the stability of CPI, and has played a very important role. This year's government work report mentioned that grain output in 2015 should be stabilized at more than 1,100 billion jin. Although the word “more than” is used, the final result may be around that quantitative target.
However, compared with last year, this means that total grain output this year will decline. This raises my concern.
At present, many experts are saying that China has surplus grain. The reason is that the granaries are full, reserved grain will become aged grain, and the cost of storage is particularly high. For the relevant departments that need fiscal funds for storage, with so much grain that cannot be moved out, it naturally appears to be too much.
In addition, for many consecutive years, China's annual import of 80 million tons of grain is equivalent to utilizing 700 million mu of foreign land. If this figure is not noticed and only the surplus grain mentioned earlier is seen, that is not comprehensive. The reason for large-scale imports against the backdrop of excessive grain in the granaries is that China's grain prices are higher than those abroad.
Therefore, two points must be noted in formulating agricultural policy. First, continue to maintain a stable trend with slight growth, because the population is growing; second, lower grain prices. At present, rising labor costs, continuously rising prices of production materials, and a low degree of mechanization are all pushing up the cost of grain production. If subsidies are provided in these areas, grain prices will naturally come down.
Therefore, accelerating land transfer and implementing large-scale operations can both ensure an increase in farmers' income and improve agricultural production efficiency and reduce production costs. This is the strategy for developing China's agriculture, rather than simply thinking that when the granaries are full, production should be cut back. That is actually very dangerous.