China relaxes agricultural product prices; 2015 grain target price system will not be expanded

Ning Deytai is the head of the Yunnan Anning Longyuan Flue-cured Tobacco Planting Professional Cooperative. In earlier years he planted several dozen mu of flue-cured tobacco, but because the returns from growing flue-cured tobacco were not even as good as growing vegetables, in recent years he has switched to other crops.

As the National Development and Reform Commission announced the cancellation of prices for flue-cured tobacco and other grades of tobacco leaf, he sensed that tobacco leaf might rise in price. "After fewer are planted, the price moves with the market, so it should go up." On January 5, he told reporters.

One day earlier, the National Development and Reform Commission published a number of reform measures, liberalizing 24 categories of goods and services, the first of which was liberalizing the purchase price of tobacco leaf.

The NDRC document pointed out that on December 17, 2014, the National Development and Reform Commission and the State Tobacco Monopoly Administration issued a notice on liberalizing the purchase price of tobacco leaf, liberalizing the purchase prices of flue-cured tobacco, burley tobacco, aromatic tobacco and other varieties and grades of tobacco leaf.

After tobacco leaf prices were liberalized, there were no longer any government-priced items in China's agricultural product sector; all prices are now formed by the market. The state mainly guides the reasonable formation of prices through minimum purchase prices, target prices and other means, protects the interests of agricultural producers, safeguards national food security, and promotes the sustained and healthy development of the agricultural industry chain.

A 21st Century Business Herald reporter learned that at present the state still has government pricing, but it is mainly indirect pricing. For example, the minimum purchase price of grain. When the market price is below this price, residents are willing to sell to the state, and the state also purchases for reserves, but when the actual price is above this price, the government cannot intervene. In addition, in the cotton and soybean sectors, a target price is implemented,

Li Guoxiang of the Institute of Rural Development under the Chinese Academy of Social Sciences pointed out that from the direction of reform, in the future the government will not set prices directly, and generally will adopt indirect pricing, as with the target price, but at present there are still many problems that are hard to solve.

"For example, when the actual market price is below the target price, how to subsidize farmers, for example whether to subsidize by area or by output, still needs study," he said.

Previously there were also reports that Guangxi's sugarcane sugar would implement a target price, but the actual situation is that, given that the cotton target price pilot has still not succeeded, the scope of the target price will temporarily not be expanded in 2015.

The government no longer sets prices for agricultural products

For many years, the result of the government setting prices for agricultural products has been severe distortion of market demand.

The simplest example is that when the state implemented the cotton purchase and storage price, the international cotton price was several thousand yuan per ton lower than the domestic price, while domestic processing enterprises had to spend more money to buy high-priced domestic cotton, which caused textile enterprises to suffer serious losses. And the state spent huge sums building cotton reserve warehouses, bearing enormous purchase and storage costs, while cotton farmers also did not gain any benefit.

The situation with flue-cured tobacco is the same.

Ning Deytai, head of the Yunnan Anning Longyuan Flue-cured Tobacco Planting Professional Cooperative, told reporters that in recent years the returns from growing tobacco leaf locally have already fallen short of vegetables. At its peak the village where the cooperative is located had more than 1000 mu of flue-cured tobacco, and at present there are only more than 300 mu.

Ning Deytai himself no longer grows his more than 30 mu of flue-cured tobacco. The reason is that although each mu of tobacco leaf can sell for more than 30 yuan, with gross income of more than 6000 yuan per mu, and about 4000 yuan left after deducting land rent and other costs, it is far inferior to other crops. When vegetables do well, one mu can bring in more than 10000 yuan in returns.