After twelve consecutive years of grain harvests, how should the grain strategy be optimized?
Grain output for 2015 was announced a few days ago, and China has joyfully achieved a “twelfth consecutive year of bumper harvests” on a high base. However, another piece of news about grain is also weighing on many people's minds: due to a sharp increase in stockpiles and falling prices, farmers in Anhui, Northeast China and other places are finding it “difficult to sell their grain”. Behind the consecutive years of bumper harvests, what difficulties does the grain market face? How can farmers' enthusiasm for growing grain be protected? These many questions test China's food security and market balance.
High stockpiles, sluggish sales: is there too much grain
During the harvest season, Xue Yaohui, chairman of the Wanxin Farmers' Professional Cooperative in Gongzhuling City, Jilin Province, wore a worried expression. Facing the grain in the cooperative's temporary storage warehouse, he felt lost and helpless.
“At this time in previous years, the grain had already started being sold to the state treasury, but this year it won't sell.” Xue Yaohui said that transporting each ton of grain from the cooperative to the nearby grain depot costs about 25 yuan, and because this year's grain purchase price has fallen, selling it doesn't even cover the cost. Watching the grain produced on the cooperative's more than 600 mu of land and nearly 6,000 mu of outsourced land have no buyer, Xue Yaohui was extremely anxious.
There are not a few farmers facing the same predicament as Xue Yaohui. Recently, the problem of “difficult to sell grain” has emerged in many places across China, and the grain market has encountered unprecedented challenges.
Zhang Ming, deputy director of the Huangchuan Directly Subordinate Depot of Sinograin in Henan, introduced that the Huangchuan Directly Subordinate Depot and entrusted depots in its jurisdiction store a total of 2.64 million tons of grain and oil. Although located in a rice-growing area and not participating in the summer grain market-support purchase, after an inventory check only more than 400,000 tons of warehouse space remains empty. “Since the autumn grain market-support purchase was launched on October 1, more than 100,000 tons of rice have been purchased so far. Based on the market-support purchase volume of previous years, a warehouse capacity gap of 500,000 tons is expected.”
On the one hand, domestic grain is selling poorly; on the other hand, grain imports are also high. Statistics show that in the first half of this year, China imported a cumulative total of 16.29 million tons of cereals and cereal flour, including wheat, corn and barley, an increase of more than 60% year on year.
“Currently, China's grain production has shown a ‘three highs’ phenomenon: high grain output, high stockpiles and high imports. As domestic grain production costs rise ever higher, the state protective-price purchase policy faces considerable pressure, and relative to lower grain prices on the international market, it is in a passive position.” said Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences.
The “ceiling” and the “tightening band”: how can grain support policies be sustainable
At present, the problem of “difficult to sell grain” once again shows that China's food security is facing new circumstances and tests, and grain support and protection policies have reached an important juncture of transformation.
Experts introduced that in 2004, China began implementing the minimum purchase price policy, and subsequently launched the temporary purchase and storage policy. These policies greatly mobilized farmers' enthusiasm for growing grain. However, as domestic grain-growing costs rose rapidly and policy purchase prices climbed steadily, grain prices gradually deviated from the market, domestic and international prices became inverted, and a series of problems emerged.
“Currently, China's grain production first faces constraints from two ‘ceilings’: one is the price ‘ceiling’, and the other is the subsidy ‘ceiling’. Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, introduced that at present China's main grain prices are already higher than international market prices, and further price increases have hit a “ceiling”. The subsidy “ceiling” means that under WTO rules, continued increases in subsidies will be restricted.
At present, China's current grain support policies fall within the category of “Amber Box” policies. According to WTO rules, the minimal subsidy amount under “Amber Box” policies cannot exceed 8.5% of the output value of that grain variety. Against this standard, the room for further increasing subsidies for some of China's grain varieties is already very limited. Therefore, reforming agricultural subsidies and agricultural product price policies is a fundamental measure for reflecting market supply and demand and achieving reasonable grain prices, and is also the key to promoting the grain market onto a track of sound development.
While the “ceiling” is limited, the two “tightening bands” of the environment and resources for grain production are becoming ever tighter. “Grain policy must consider not only current output, but also food security 5 years and 10 years from now, and for future generations.” Cheng Guoqiang, secretary-general of the Academic Committee of the Development Research Center of the State Council, pointed out that current grain support policies focus on encouraging increases in grain output and pay insufficient attention to grain quality, resources and the environment, so the sustainable development of grain production is being tested.
Preventing “cheap grain hurting farmers”: how to comprehensively optimize the grain strategy
To prevent “cheap grain hurting farmers”, the recent State Council executive meeting made clear that multiple measures must be taken simultaneously to stabilize grain production and increase grain-growing income, and to safeguard food security and farmers' interests by doing a good job in purchases, digesting stockpiles, and reforming the grain price formation mechanism. At the same time, localities and relevant departments have already taken action, adopting various measures to respond to the problem of “difficult to sell grain”.
Experts pointed out that “difficult to sell grain” reflects not only a stockpile problem, but also the result of uncoordinated grain production and marketing mechanisms compounding one another. In the long run, it is necessary to rely on the hand of the market to establish a long-term mechanism, improve the grain price formation and purchase-and-storage mechanisms, and comprehensively optimize the overall grain strategy.
“Current grain support policies are falling into difficulty and must be upgraded. The direction of reform is to reduce the distorting impact of price support policies on the agricultural product market and truly give play to the decisive role of the market in allocating resources.” Cheng Guoqiang analyzed and pointed out that China's grain support policies must also transition from “Amber Box subsidies” to “Green Box subsidies”, increasing subsidies for agricultural science and technology, water conservancy, environmental protection, insurance and other areas.
Experts pointed out that as China develops to its current stage, while emphasizing grain quantity, it should pay more attention to quality and quality safety, and while safeguarding current supply, it should pay more attention to the sustainable development of agriculture.
“The future food security strategy must have a global vision and a worldwide layout.” Cheng Guoqiang pointed out that this includes implementing a strategy of diversified agricultural product imports, a strategy of overseas agricultural investment, and a new type of international agricultural cooperation strategy, while at the same time planning as early as possible to establish a global bulk commodity trading center, so that China can win more say in the pricing of international bulk agricultural products.