Steady grain production, increased income, improved quality and efficiency must be market-oriented
In 2014, China's agricultural product supply was generally adequate. Under effective state regulation, grain prices rose slightly while remaining stable, cotton, oilseeds and sugar continued to fall, and fresh agricultural products fluctuated seasonally. Against the backdrop of continued declines in international bulk agricultural product prices, domestic and international prices for agricultural products became universally inverted, and imports continued to remain at a relatively high level. It is expected that international agricultural product prices will continue to operate at a low level for some time to come, and the import price “ceiling” will increasingly squeeze the reasonable room for domestic agricultural product prices to rise, while the rigid rise of the “floor” of China's agricultural production costs will increasingly squeeze farmers' room to increase income from grain growing. How to proceed from market demand, improve the competitiveness of China's agricultural products, proactively respond to the double squeeze of the “ceiling” and the “floor,” and achieve stable grain production, increased income, structural adjustment, improved quality, increased efficiency and transformation of development methods has become an important strategic option for China's agricultural development under the new normal of economic development.
The inversion of domestic and international prices for agricultural products will become the norm for a period of time
In recent years, the domestic market prices (wholesale prices or port arrival prices) of major agricultural products such as grain, cotton, oilseeds, sugar and meat in China have become comprehensively higher than the post-tax landed import prices of foreign products within quota, and some products were once higher than the post-tax landed import prices outside quota. The specific manifestations are as follows:
The price gaps for some varieties (the difference between the domestic market price of agricultural products and the post-tax landed import price of foreign products within quota) gradually widened. In November 2014, the price gaps for the three major grains of rice, wheat and corn were as high as 1.08 yuan, 0.58 yuan and 0.52 yuan per kg respectively, all wider than in 2013. Taking into comprehensive consideration factors such as international and domestic supply and demand conditions, it is expected that the post-tax landed import price outside quota may be breached after 6~8 years.
For some varieties, price inversion shifted from volatility to persistence. Around the 1990s, domestic grain prices were formed under the “dual-track” system, and some varieties were once higher than international market prices. After entering this century, the domestic and international grain price gap narrowed somewhat. With the full liberalization of China's grain market in 2004, and especially the end of China's “WTO accession” transition period in 2006, the inversion of domestic and international grain prices began to persist, shifting from inversion for some varieties to comprehensive inversion. Since the new century, the domestic and international prices of pork, wheat, sugar and cotton successively began to invert. In July 2013, domestic prices of rice and corn began to remain persistently higher than the post-tax landed import prices within quota. In 2014, major agricultural products such as grain, cotton, oilseeds, sugar and meat showed a comprehensive inversion. It is expected that next year the output of most agricultural products globally will still be at a high level, market supply will be adequate, and in addition the global economic recovery is slow, prices of energy and other bulk products are at a low level, and growth in both food demand and industrial demand for agricultural products is relatively slow. Prices will remain at a low level in the short term, the inversion of domestic and international agricultural product prices will continue, and the price gaps may even widen further.
The fundamental reason for price inversion is that China's agricultural resources are scarce, labor productivity is low and production costs are rising rigidly, resulting in weak market competitiveness of agricultural products. The direct reason is insufficient agricultural support and protection measures such as tariffs and subsidies. Due to resource constraints, the average operating scale of Chinese farmers is currently only equivalent to 1/3 of that of South Korea and Japan, 1/40 of that of the European Union, and 1/400 of that of the United States. According to World Bank estimates, in 2013 China's agricultural value added per agricultural laborer was only 64% of the world average. China's agriculture has comprehensively entered an era of high costs. From 2006 to 2013, the average annual growth rates of production costs for rice, wheat, corn, cotton and soybeans in China were 11.0%, 11.6%, 11.6%, 13.1% and 12.0% respectively. At the same time, China's average tariff on agricultural product imports is only 15.2%, one quarter of the world average, and China has given up the special safeguard mechanism for trade. Domestic agricultural subsidies still lag far behind those of developed countries. In addition, in recent years the continuous decline in international shipping costs and the continued appreciation of the renminbi have helped widen domestic and international price gaps.
Responding to price inversion should adopt bottom-line thinking and resolutely hold the three bottom lines
Price inversion will have a profound impact on the overall situation of China's agricultural development. On the one hand, “moderate imports” help ease the increasingly tight pressure on agricultural resources and the environment. But on the other hand, price inversion stimulates imports, forming a “ceiling” for the reasonable rise of domestic agricultural product prices, and together with the continuous rigid rise of the “floor” of domestic agricultural production costs, this creates a double squeeze on farmers' income from grain growing. Under current conditions, the negative effects are more prominent. Therefore, the urgent task is to comprehensively use means such as quota management, trade remedies, import product end-use control, inspection and quarantine, and “green box” subsidies to prevent the negative effects of price inversion from further expanding and to hold the three bottom lines of farmers' income, grain ration production capacity, and supply of important agricultural products.
From the perspective of addressing the root cause, it is necessary, in accordance with the spirit of the 18th National Congress of the Communist Party of China, the Third Plenary Session of the 18th Central Committee, this year's Central Economic Work Conference and the Central Rural Work Conference, to take reform and innovation as the driving force and accelerate the realization of agricultural modernization with Chinese characteristics. Specifically, it is necessary to take market demand as the guide to drive stable grain production, increased income, improved quality and increased efficiency, and effectively improve the competitiveness of China's agricultural products.
First, adjust the agricultural structure with market demand as the guide. It is necessary to target the major demand arising from rising household consumption levels and upgrading of consumption structure against the background of urbanization, and, according to changes in market supply and demand and regional comparative advantages, promote adjustment of the agricultural structure toward products in short supply in the market, toward high-quality specialty products, and toward integrated production, processing and sales. It is necessary to develop urban modern agriculture and expand the multifunctionality and value-added space of agriculture. In particular, it is necessary to take branding as the guide to promote the transformation of the development mode of the processing industry, promote the transformation of the agricultural product processing industry from scale and quantity expansion toward quality improvement and structural optimization, and establish a mechanism for sharing interests between agricultural product processing enterprises and farmers.
Second, improve the price formation mechanism for agricultural products with stable grain production and increased income as the goal. It is necessary to give full play to the positive role of the current agricultural product price support policy, and adhere to and improve the minimum purchase price policy for rice and wheat and the temporary purchase and storage policy for important agricultural products. It is necessary to actively and steadily advance the pilot program of target price subsidies for soybeans and cotton and summarize the experience of price reform. It is necessary to explore market-based methods such as insurance and loans and comprehensively build a “safety net” for guarding against farmers' income risks. It is necessary to accelerate the construction of a market regulation system that meets the requirements of the new situation, and prevent drastic price fluctuations by strengthening domestic reserve adjustment and encouraging diverse entities to participate. It is necessary to strengthen information monitoring, early warning and release, carry out agricultural outlook activities, and give play to the guiding role of consumption.
Third, improve the efficiency of agricultural product circulation with agricultural product e-commerce as the platform. It is necessary to accelerate the development of agricultural product e-commerce demonstrations, build a national agricultural product e-commerce support system led by national-level origin wholesale markets and with field markets as nodes, integrating logistics, information flow and capital flow, promote cooperation between various business entities and large e-commerce platforms, and jointly explore multiple marketing models such as graded and classified branded agricultural products and “field market + e-commerce enterprise + urban terminal distribution.” It is necessary to accelerate the construction of village-level information service stations (personnel) and innovate agricultural product circulation models.
Fourth, improve the efficiency and benefits of agricultural production and operation by cultivating new types of business entities as the starting point. It is necessary to stabilize and improve the rural land contracting relationship, accelerate the development of appropriately scaled operations, accelerate the cultivation of new-type professional farmers, improve the agricultural social service system, continuously strengthen infrastructure construction such as farmland water conservancy, promote cost-saving and efficiency-increasing technologies, and raise the level of agricultural mechanization.