Grain purchase policy accelerates marketization due to inverted production-sales relationship

The latest national grain production data released by the National Bureau of Statistics show that in 2014 the national total grain output was 607.1 million tons, an increase of 0.9%. At the same time, net imports of China's three major staple grains——rice, corn and wheat——have become the norm.

Statistics show that over the past 3 years, imports of corn, wheat and rice have doubled. Corn imports reached 5.207 million tons in 2012, wheat imports reached 3.689 million tons, and rice reached 2.316 million tons. Data released by the General Administration of Customs show that in 2014 grain imports, led by wheat, accelerated sharply, with grain imports including wheat, rice and corn surging 80.7% year on year in the first 7 months.

Industry experts believe that the overall slowdown in global economic growth, the low-level operation of futures and spot prices of international grain and other bulk agricultural products, and the widening price gap between domestic and foreign grain are the main reasons for the increase in China's imports.

The surge in imports is mainly due to the severe inversion between domestic and foreign grain prices, with foreign grain having an obvious price advantage, the price gap being 400-500 yuan/ton. In 2013 China's output of the three major staple grains reached 540 million tons, and grain imports accounted for only 2.04%

Domestic grain prices are higher than foreign grain prices, causing China to continuously import grain. What impact will such long-term imports have on China?

A certain impact on the domestic grain market

A large amount of grain entering China has a certain impact on the domestic grain market. On the one hand, the inflow of large quantities of low-priced foreign grain will squeeze the market share of domestic grain enterprises and drive some grain enterprises out of business; on the other hand, because of its low price, foreign grain has become more substitutable for domestic grain. In the case of corn and wheat, starch factories and feed mills are purchasing more foreign grain, while domestic rice mills, distributors and downstream industrial demand use low-priced foreign rice to replace domestic rice. In this way, over the long term, domestic processing enterprises, in order to ensure profits, will one after another purchase foreign grain and reduce purchases of domestic grain, ultimately harming the income of the farmers who work the land, as the grain they grow will have no buyers.

For a country, grain imports are by no means always better the more the merrier; they may endanger the healthy development of the domestic agricultural industry and cause the cultivated area of certain crops to shrink. In addition, a large increase in grain imports from abroad will suppress the domestic agricultural industry, causing industrial development to lack the necessary incentives and momentum and bringing potential risks to the long-term security of agricultural product supply.

According to the reporter's understanding, in fact, the Central Rural Work Conference held at the end of last year attached great importance to the issue of national food security. The meeting stressed the need to adhere to the national food security strategy of taking our own efforts as the mainstay, basing ourselves on domestic production, ensuring production capacity, importing appropriately and relying on scientific and technological support; at the same time it stressed that the Chinese people's rice bowl must at all times be held firmly in our own hands, that resources must be allocated rationally, and that efforts must be concentrated first on safeguarding the most basic and most important things, ensuring basic self-sufficiency in grains and absolute security of staple rations; in addition, the meeting mentioned the need to make good use of both markets and both types of resources, appropriately increase imports and accelerate the pace of agriculture going global, and grasp well the scale and pace of imports.

Since foreign grain prices are lower than domestic grain prices, causing China to import large quantities of grain, why are China's grain prices higher than those abroad, and what are the reasons? How can China's grain prices be brought in line with those of China?