Why is it hard for stockpiling to improve the competitiveness of agricultural products? Dang Guoying explains

Setting intervention prices for agricultural products according to farmer income targets may weaken the pressure of market competition and bring marginal land with backward productivity into cultivation.

According to media reports, a reporter learned from authoritative sources that the research for the 13th Five-Year Plan for agriculture is considering abolishing the temporary stockpiling policy, so as to solve the problems brought by stockpiling, such as the price inversion and the high volume of grain imports.

Since the beginning of the year, the state has made important adjustments to the price policy for some agricultural products. Under the new policy, the state will retain temporary stockpiling for corn, rapeseed and sugar, and abolish the temporary stockpiling policy for soybeans and cotton. This year's No. 1 Central Document also pointed out that the government will advance the reform to decouple the price formation mechanism for agricultural products from government subsidies, and gradually establish a target price system for agricultural products, subsidizing low-income consumers when market prices are too high, and subsidizing producers according to the price difference when market prices are below the target price, so as to effectively guarantee farmers' incomes. Judging from the development trend, China will gradually give up direct government intervention in the price formation of agricultural products. This is progress in decision-making.

Direct government intervention in the prices of agricultural products does more harm than good. The formation of market prices is affected by a complex mix of factors, including both objective factors and subjective factors, and it is nearly impossible for officials or market observers to make accurate predictions. If intervention prices for agricultural products are set according to farmer income targets, it may also weaken the pressure of market competition, bring marginal land with backward productivity into cultivation, and increase the cost of agricultural products. If such a policy is implemented over the long term, it will have the effect of protecting backwardness, which is not conducive to improving the international competitiveness of China's agricultural production.

Direct government intervention in the prices of agricultural products also places enormous pressure on government finances. Purchasing agricultural products over a long period at benchmark prices higher than international market prices will cause more agricultural products from the international market to enter the domestic market through legal or illegal means, and may even lead the state to purchase foreign agricultural products, which will inevitably overwhelm government finances.

Pricing agricultural products is a difficult problem. From the perspective of actual economic relations, on the one hand, in the face of relatively low agricultural product prices in the international market, the government will ultimately be unable to hold prices up over the long term; on the other hand, if domestic agricultural product prices are allowed to be affected by the international market, more land of poor quality will inevitably withdraw from cultivation, and total production will decline. From the perspective of the circulation situation, on the one hand, after the government withdraws from the agricultural product pricing system, there are few pricing entities in the domestic production or circulation sector capable of influencing agricultural product prices, and it is no longer feasible for the government to step forward; on the other hand, the pricing power of major agricultural product exporting countries such as Europe and the United States, and their ability to influence prices in our market, will increase significantly. This requires us to have stronger response policies.

The fundamental paths to improving the overall competitiveness of China's agriculture are, first, to promote the modernization of China's agricultural management organization system. Develop family farms and expand the scale of agricultural operations; second, to change the model of agricultural technological progress. In recent years, corn yields in northwest China have risen rapidly, and farmers' net incomes have increased significantly, which is due to the adoption of dryland farming techniques.

□Dang Guoying (scholar)