Grain production has had bumper harvests year after year, so why are grain prices still rising?

In 2014, China's grain output reached 1.21 trillion jin, achieving an “eleventh consecutive increase”. Centering on China's grain security issue, at the joint group discussion meeting of the agriculture sector of the Chinese People's Political Consultative Conference, the committee members held a heated discussion.

With inventories increasing year after year, is it possible to produce less grain?

“After consecutive years of grain output increases, China's grain inventory has been growing year by year, and storage pressure and costs have increased.” Zheng Hui, president of the Agricultural Development Bank of China and a committee member, raised this question——is China's grain “in surplus”?

In response, Niu Dun, former vice minister of agriculture and a committee member, analyzed: “China's per capita grain exceeds 400 kg, but compared with developed countries it is still relatively low, and it still cannot meet the requirements of improving people's dietary structure and raising their standard.”

“From a global perspective, grain supply still falls short of demand, and 1 billion people in the world are still hungry or semi-hungry. From the perspective of the international market, China has a huge population and faces a great-power effect, often buying whatever rises and selling whatever falls. Once a problem arises in domestic supply, importing bulk agricultural products from neighboring countries would probably be very problematic for us.” Niu Dun said, “To safeguard our grain security, we must base ourselves on domestic production.”

“Grain production must never be relaxed at any time.” The committee members expressed their agreement one after another. Chen Zhangliang, a member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference, said: “From historical experience, after consecutive years of grain output increases, a decline easily occurs, and once output declines it will bring serious consequences. Therefore we must intensify efforts to guarantee production, and must not relax production because of increased inventories. We must absolutely not let grain output fall.”

With bumper harvests year after year, why are grain prices still rising?

“The rise in domestic grain prices is mainly due to three factors: first, feed grain and industrial grain use continue to increase; second, the cost of grain production has increased, with the cost of means of production rising by an average of 6.5% per year in recent years; third, purchase prices have risen.” Niu Dun said.

Chen Zhangliang said: “The rise in labor prices has become a factor that cannot be ignored. Labor accounts for an increasing share of agricultural production costs, causing grain production costs to rise. Fundamentally, this is still caused by the low level of China's agricultural labor productivity.”

Ke Bingsheng, president of China Agricultural University and a committee member, said: “According to past patterns, grain production has one good year and one bad year, but demand increases every year and is rigid. In fact, the challenges now are very serious, and these challenges are long-term. We must use ever less land, ever less water resources, and ever less agricultural labor to produce more, better, and safer agricultural products.”

With the “eleventh consecutive increase”, why is imports still needed?

“First, it is needed for variety adjustment; varieties not available domestically, or varieties whose output is insufficient, need to be imported from abroad; second, because the domestic market prices of some grain varieties are higher than international market prices.” Niu Dun said. “To resolve the double squeeze of the ‘ceiling’ and the ‘floor’, I believe we need to increase subsidies to farmers. Developed countries' subsidies for agriculture have reached 30%-70% of agricultural production costs, and we have not yet reached such a high level.”

Committee member Ke Bingsheng believes the reason is simple. The population is increasing, the consumption structure is changing, and the annual grain consumption of 170 million migrant workers is far higher than their level in rural areas.

Grain certainly must be imported, because there is not enough land. What should be imported? Land-intensive products should be imported, such as soybeans. China's soybean yield per mu is only about 120 kg. If we used the area for producing 70 million tons of soybeans to produce wheat and corn, then China's cultivated area would need to increase by two to three times. Through such a method, the use of land resources can be realized.