Top 10 News Stories in China's Grain Economy in 2015
On January 22, the State Council issued the "Several Opinions on Establishing and Improving the Provincial Governor Responsibility System for Food Security," clarifying the provincial governor responsibility system for food security.
On January 22, the State Council printed and distributed the "Several Opinions on Establishing and Improving the Provincial Governor Responsibility System for Food Security," which further clarified the authority and responsibilities of provincial-level people's governments in safeguarding national food security across such links as grain production, circulation and consumption, and made comprehensive arrangements for establishing and improving the provincial governor responsibility system for food security.
In-depth reading: The issuance of the Opinions changed the food security "responsibility system" to the provincial governor "responsibility system" for food security, achieving a new breakthrough in rationalizing the grain circulation management system and laying an important institutional foundation for comprehensively deepening grain circulation reform and comprehensively advancing law-based grain governance.
On November 12, the General Office of the State Council printed and distributed the "Measures for Assessing the Provincial Governor Responsibility System for Food Security." The main assessment contents include six aspects: ensuring the continuous enhancement of sustainable grain production capacity, protecting the enthusiasm for growing grain, implementing local grain reserves, ensuring basic stability of grain market supply and prices, strengthening farmland pollution prevention and control, and implementing the duties and tasks of agriculture, grain and other relevant administrative departments.
The Assessment Measures not only clarified various responsibilities, but also strengthened supervision and assessment of provincial governors. For those who cause serious impact due to failure to perform duties or major work errors, relevant responsible persons shall be held accountable in accordance with law and discipline, ensuring the rapid and effective implementation of the Opinions.
After the issuance of the Opinions and the Assessment Measures, Anhui, Hubei, Guizhou and other provinces successively formulated their own provincial "food security assessment measures"; Shandong, Hebei, Hunan and other provinces also successively convened executive meetings of provincial governments to study and implement the "Implementation Rules for the Provincial Governor Responsibility System for Food Security." This provided policy guidance for comprehensively implementing the balance system for cultivated land occupation and compensation in China, stabilizing total grain output, stabilizing grain prices, alleviating farmers' difficulties in selling grain, protecting grain farmers' enthusiasm, and improving the level of emergency grain security.
On February 1, the 2015 Central "No. 1 Document" was released, with food security taking top priority.
On February 1, the 2015 Central No. 1 Document was officially published. The document stated that after the economy entered a new normal, how to innovate agricultural support and protection policies, accelerate the transformation of modern agricultural development methods, and improve agricultural competitiveness under "double squeezing" had become the key to breaking through the deadlock in China's agricultural development. It was necessary to strengthen policy bias toward major grain-producing provinces and counties, continuously enhance grain production capacity, improve grain collection and storage capacity, improve the quality and safety of agricultural products, and continuously improve the price formation mechanism for agricultural products, which became highlights focusing on the grain industry.
In-depth reading: The "No. 1 Document" locked onto "agriculture, rural areas and farmers" issues for the twelfth consecutive year, reflecting the Central Committee's confidence and determination to make solving "agriculture, rural areas and farmers" issues a top priority in the work of the entire Party. Unlike previous years, the 2015 No. 1 Document for the first time proposed "strengthening research on agricultural genetically modified biotechnology, safety management, and scientific popularization," requiring research and utilization of genetically modified biotechnology on the premise of ensuring safety, reflecting China's extremely cautious attitude toward the application of genetically modified technology in grain and food.
The No. 1 Document also for the first time responded to domestic doubts about excessive grain imports. Among them, "scientifically determining the self-sufficiency level of major agricultural products" means not pursuing excessively high or excessively low self-sufficiency rates, preventing two extremes, and determining them according to domestic resource endowment characteristics and actual production levels. Important grain crops must meet supply in quantity, must not rely on imports, ensure "absolute security of rations," and ensure the steady implementation of the food security strategy.
When grain is secure, the nation is stable. On January 7, the website of the Ministry of Agriculture announced that China would launch a strategy to make potatoes a staple grain, making potatoes China's fourth major staple grain, processed into steamed buns, noodles, rice noodles and other staple foods. After the implementation of the staple grain strategy, the potato industry flourished, with cakes, almond crisps and other products made from potatoes on display in great variety, and some enterprises began preparing to build production lines for potato noodles and stone-milled flour. As an important supplement to food security, potatoes help the smooth implementation of the national food security strategy under the new situation.
In addition, the newly promulgated "National Security Law of the People's Republic of China" on July 1 also incorporated food security into the scope of national security issues. This was the first time China included food security in the national security system, placing food security after financial security, highlighting the importance of food security in national security governance.
During the Spring Festival in February 2015, Chinese people's rush to buy "astronomically priced Japanese rice" sparked heated discussion.
During the Spring Festival in 2015, mainland Chinese travelers set off a wave of panic buying of Japanese rice, with some spending nearly 1,500 yuan to buy 5 kg of Japanese rice. This was another incident of panic buying Japanese goods after the rush for Japanese rice cookers and toilet seats. In fact, this was only a sequel to Chinese people's rush to buy "astronomically priced Japanese rice." In July 2007, China resumed imports of Japanese rice, and Japanese imported rice priced more than 20 times that of domestic rice was snapped up.
In-depth reading: Behind the frenzy for Japanese rice lies this fact: first, domestic rice is facing a trust crisis in terms of quality; second, domestic rice is at an obvious disadvantage in international competition and is being eliminated.
Experts believe that the main reason domestic rice is neglected is not poor quality, but that Chinese people have doubts about the safety of domestically produced grain. In addition to the reason that domestic rice is not trusted in quality, the domestic rice market is still dominated by bulk rice, and the failure to form strong rice brands is also one reason. Serious absence in the high-end market has led to the gradual decline or elimination of some well-known brands.
Fortunately, some Chinese rice enterprises have realized that the scattered, guerrilla-style mode of operation will eventually be eliminated in competition, and that joining forces is the effective weight for rice enterprises to break through their predicament. On October 25, the 2015 Jilin Rice New Rice Launch Conference was held in Beijing. To create the "platinum business card" of Jilin rice, Jilin Province established a provincial rice industry alliance. Products of the newly unveiled alliance enterprises were uniformly marked with the "Jilin Rice" logo. The brand building of "Jilin Rice" officially sounded the "assembly call," elaborately building the main brand of "Jilin Rice."
On April 17, Liaoning and Jilin provinces were exposed for "passing off old grain as new grain to maliciously pocket price differences and national subsidies."
In mid-April, Liaoning and Jilin provinces exposed incidents in which individual grain depots, during policy-based grain collection, storage and sales outbound processes, "passed off old grain as new grain to maliciously pocket price differences and national subsidies." On April 18, the National Food Administration dispatched verification working groups to Tieling Kaiyuan in Liaoning, Songyuan Qianguo in Jilin and other places to carry out on-site verification and on-site supervision, immediately sealing the grain involved, controlling key persons involved according to law, ascertaining the truth of the problems, and seriously holding relevant enterprises and personnel accountable. At the same time, it also strictly investigated various "circulating grain" problems in the state policy-based grain collection, storage and sales outbound processes in the three northeastern provinces and one region, such as buying old to offset new, collecting first and then transferring, and buying low and transferring high. The rapid response of the National Food Administration demonstrated China's high-pressure posture in cracking down on illegal and disciplinary violations in grain purchasing, storage and other fields.
In-depth reading: It never rains but it pours. In early November, the Baidian depot of the Baidian Grain and Oil Purchase and Sales Company in Huangchuan County, Henan Province, saw an incident of "favor grain" in which grain depot staff collected kickbacks from farmers selling grain, once again pushing the issue of grain collection and storage to the forefront.
Problems such as consecutive years of bumper grain harvests, continuously one-way rising support prices, and low auction outbound rates for temporarily stored grain plunged some major grain-producing areas into the predicament of grain that "cannot be auctioned off, cannot be transferred, and cannot be sold," with grain inventories reaching unprecedented levels. The behavior of staff at individual depots collecting kickbacks from grain-selling farmers due to tight warehouse capacity not only harmed farmers' interests but also greatly discounted the state's benefit-to-farmers policies. On November 13, Henan Province set up an investigation team to thoroughly investigate "favor grain," with three non-governmental personnel detained and multiple government staff held accountable.
After the "favor grain" controversy, in response to the phenomenon of "difficulty in selling grain," the Xinyang city government actively adopted measures such as recommendation by local governments and guarantees by guarantee companies, using social warehouse capacity to participate in policy-based purchasing, and increasing collection and storage depots to resolve farmers' "difficulty in selling grain."
On May 7, Bright Food Group and Liangyou Group completed a joint reorganization to strengthen the "big brand."
On May 7, the Shanghai Municipal State-owned Assets Supervision and Administration Commission issued a notice on the joint reorganization of Bright Food Group and Shanghai Liangyou Group, opening the curtain on the joint reorganization of Bright and Liangyou. The joint reorganization of Bright Food Group and Liangyou Group produced a "1+1>2" effect, increasing capital for head-on competition with COFCO Group in terms of both scale and sector coverage.
In-depth reading: The joint reorganization of Bright and Liangyou to achieve a strong-strong alliance of resources was not the first case this year. On April 30, Tianjin integrated four major groups, including the Agricultural Reclamation Group, Ershang Group, Grain and Oil Group and Lida Group, to form Tianjin Food Group Co., Ltd. After reorganization, Tianjin Food Group further enhanced its capabilities in food supply security, enhancing the market influence of famous and high-quality brands, expanding supply regions and service scope, and safeguarding residents' dietary safety; it laid the foundation for building a leading state-owned large food industry group with excellent brands, good benefits and public reassurance.
In recent years, amid increasingly fierce competition among diverse market entities, grain enterprises, affected by factors such as the current economic environment and market demand, have encountered problems such as financing difficulties, weak competitiveness, a single business model and lack of self-accumulation, making business operations extremely difficult.
Enterprise mergers and reorganizations are an important way to invigorate enterprises, revitalize assets and enhance competitiveness. The joint reorganization of Bright and Liangyou and the formation of Tianjin Food Group provide positive reference significance for advancing grain enterprises toward groupization, large-scale operation and industrialization, and cultivating a batch of internationally competitive large grain and large food enterprises. They also provide new ideas for reversing the current situation of China's grain enterprises being "small, scattered and weak" and strengthening "big brands."
On June 15, three ministries and commissions issued the "Construction Plan for Food Collection, Storage and Supply Security Projects (2015-2020)" to respond to six major challenges to food security.
On June 15, the National Development and Reform Commission, the National Food Administration and the Ministry of Finance and other three departments issued the "Construction Plan for Food Collection, Storage and Supply Security Projects (2015-2020)." This was the first national-level special plan in the area of grain circulation infrastructure construction. It required comprehensively enhancing the security capacity for grain collection, storage and supply, holding the bottom line of grain circulation work that "grain grown can be sold and grain for eating can be bought," maintaining basic balance between grain supply and demand and basic price stability, promoting grain output increases and farmers' income growth and the modernization of grain circulation, and ensuring national food security.
In-depth reading: At present, contradictions in China have become prominent, including severely insufficient grain collection and storage warehouse capacity, poor logistics channels, weak emergency supply capacity, relatively large hidden quality and safety hazards, lagging grain condition monitoring and early warning, and serious post-production losses and waste. These have become fetters on safeguarding national food security, brought severe challenges to national food security, and reached a point where change is imperative.
According to the National Food Administration's compilation, current grain storage problems are mainly concentrated in the following: the contradiction of insufficient warehouse capacity in major grain-producing areas is prominent; old warehouses in some areas "store grain while sick"; some enterprises lack safe grain storage equipment and have backward technical measures; in particular, a considerable portion of open-air and simple storage facilities in Northeast China and the Inner Mongolia Autonomous Region have hidden safety production hazards such as fire safety issues, as well as risks of autumn condensation and top mold; in some areas of southern China, grain temperatures for grain stored under outdoor canopies remain persistently high, making pest and mold control difficult; in addition, some grain is stored beyond its expiry.
The Plan proposed six major construction tasks: building grain and oil storage facilities, opening up grain logistics channels, improving the emergency supply system, safeguarding grain and oil quality and safety, strengthening grain condition monitoring and early warning, and promoting grain conservation and loss reduction; it also required strengthening food security responsibilities and incorporating provincial governments' tasks for ensuring the security of grain collection, storage and supply construction within their regions into the provincial governor responsibility system for food security.
As an important basis for China's grain circulation infrastructure construction in the coming period, the Plan provided policy reference and institutional guarantees for improving China's grain circulation facility conditions, ensuring grain collection, storage and supply, enhancing the capacity for grain macroeconomic regulation, and safeguarding military needs and civilian food.
On July 16, General Secretary Xi Jinping pointed out during an inspection and survey in Yanbian, Jilin: "Grain also needs to build brands."
On the afternoon of July 16, General Secretary Xi Jinping came to Guangdun Village, Dongcheng Town, Helong City, Yanbian Korean Autonomous Prefecture, Jilin. At the largest rice base in the Yanbian area, known as the "Pinggang Oasis," Xi Jinping chatted cordially with villagers and agricultural technicians who were working. Xi Jinping said that China has a population of 1.3 billion and must rely on itself to stabilize grain production. Grain also needs to build brands, so that prices are good and benefits are good.
In-depth reading: "Grain also needs to build brands" is both the General Secretary's suggestion for the future development direction of the grain industry and his earnest hope for China's grain to build domestic brands and international famous brands.
Since Thailand first became the world's largest rice exporter in 1979, it has continuously held the championship for more than thirty years, thereby winning the crown of "world rice barn." In addition to quality reasons, branding was also an important reason why Thai rice became "world rice."
Compared with Thai rice, which has clear positioning and stable output, domestic rice with good quality, little fame and weak competitiveness is precisely a reflection of the lack of brand building over many years. At the same time, we can also see that although branded grain on the market is expensive, it still has many admirers. Japanese rice at nearly 150 yuan/jin being snapped up and Thai fragrant rice standing out internationally are the best examples. The reason is that consumers are more rational when purchasing goods, paying attention not only to functional value such as quality, taste and nutrition, but also to the psychological satisfaction brought by brands.
Practice has also proved that a brand is not merely a single tangible and intangible asset, but also means market share and public recognition, as well as higher profits brought by premiums. Doing a good job in and making grain brands bigger is the necessary path for China's grain to go global and participate in international competition, and this has become a consensus in the grain industry.
On September 17, relevant national departments issued the "Notice on Lowering the Corn Collection and Storage Price to 1 yuan/jin," further adjusting and improving grain policy.
On September 17, relevant national departments issued the 2015 notice related to temporary corn storage, lowering the corn collection and storage price to 1 yuan/jin. On November 2, the Ministry of Agriculture published the "Guiding Opinions of the Ministry of Agriculture on Corn Structural Adjustment in the 'Sickle Bend' Region," striving to stabilize corn planting area in the "Sickle Bend" region at 100 million mu by 2020, a reduction of more than 50 million mu from the current level. Advancing corn structural adjustment in the "Sickle Bend" region is an effective way to promote the sustained and stable development of corn production on the premise of ensuring basic self-sufficiency in grains.
In-depth reading: To achieve the food security goal of "basic self-sufficiency in grains and absolute security of rations," on October 10, the National Development and Reform Commission released the news that "the government will continue to implement the minimum purchase price policy in major wheat-producing areas in 2016." With the approval of the State Council, the minimum purchase price for wheat (third grade) produced in 2016 was 118 yuan per 50 kg, remaining unchanged from the 2015 level. On October 15, the "Several Opinions of the Central Committee of the Communist Party of China and the State Council on Advancing Price Mechanism Reform" was released, requiring continued implementation and improvement of the minimum purchase price policy for rice and wheat.
The support prices for the two staple grain varieties, wheat and rice, remaining unchanged was decided after comprehensively considering grain production costs, market supply and demand, domestic and international market prices, and the development of the grain industry, and has a positive role in promoting and safeguarding the smooth implementation of China's food security strategy.
In June, the National Food Administration and other departments issued the "Notice on Doing a Good Job in Rapeseed Purchase in 2015," deciding to cancel the temporary rapeseed storage policy starting in 2015, with local governments responsible for organizing various enterprises to purchase rapeseed, the central finance department to provide appropriate subsidies to major rapeseed-producing areas, and continued support for oilseed industry development in various places through reward policies for major oil-producing counties. At this point, the temporary storage policies for the three oilseed crops of soybean, cotton and rapeseed were all canceled, and price reform advanced further. In early December, the "Implementation Plan for the Pilot Reform of the Soybean Target Price" of Heilongjiang and Jilin provinces received national approval.
The intensive adjustment of grain policy reflected the state's gradual rationalization of the relationship between the government and the market and reduction of government intervention in the grain market. Moreover, adjustment of the support price policy helped change the market-based grain price formation mechanism and guide farmers to adjust grain planting structure according to local conditions.
On November 23, COFCO tested the waters of "Internet Plus," and "Liangda.com" was launched.
On the morning of November 23, "Liangda.com" was launched. This was an electronic grain trading platform jointly built by COFCO Group and China Merchants Group with an investment of 300 million yuan. With the financial services of "Liangda.com" for corn procurement, working capital turnover could accelerate from the traditional 3-4 times/year to 8-10 times/year. At present, the raw grains already online at "Liangda.com" include corn, wheat, rice, soybeans, palm oil, barley, sorghum and others.
In-depth reading: The agricultural grain industry is the lowest-level industry among the three industries. Due to a weak foundation and poor information flow, it has become the industry farthest from embracing the Internet, yet the potential market space of the entire industrial chain is nearly 10 trillion. COFCO's test of "Internet Plus" can effectively solve pain points in China's agricultural grain trade industry such as information asymmetry, inconvenient transactions, low logistics efficiency, lack of performance guarantees and insufficient working capital.
While actively testing "Internet Plus," COFCO Group also accelerated its global industrial layout.
On December 22, COFCO International Limited, under COFCO Group, acquired the 49% stake in COFCO Noble Agriculture held by Noble Group for 7.5 billion US dollars. COFCO Noble Agriculture was renamed COFCO Agriculture and became a wholly owned subsidiary of COFCO Group.
COFCO's acquisition of Noble and its test of "Internet Plus" were only a solid step by COFCO Group toward "seeking change through innovation and advancing resource integration to optimize asset layout and enhance profitability." On February 13, COFCO Group's reform pilot plan received approval from the State-owned Assets Supervision and Administration Commission. As one of the first batch of central state-owned enterprises targeted for pilot reform, COFCO Group had strong expectations for accelerating reform to enhance efficiency and vitality in the future.
On December 8, the National Bureau of Statistics released the 2015 national grain output data, and China's total grain output welcomed a "twelfth consecutive increase."
Data from the National Bureau of Statistics on December 8 showed that in 2015, national total grain output was 621.435 million tons (1,242.87 billion jin), an increase of 14.408 million tons (28.82 billion jin) over 2014, up 2.4%, welcoming a "twelfth consecutive increase" in grain.
In-depth reading: In a nation, grain comes first. Against the background of relatively great downward pressure on the domestic economy and the possibility of a rebound in international grain prices, China's grain harvest again this year was of great significance to the stable operation of the economy and society.
But the problems concealed behind the bumper harvest must also attract attention. Along with consecutive output increases, China's grain depots have contracted a severe "obesity disease." The National Food Administration had previously used two "unprecedented" phrases to describe the new high in current grain inventories. Once stored grain exceeds the safety coefficient, it will not only bring a heavy burden to state finances, but also produce the phenomenon of "expensive grain hurting farmers."
In contrast to consecutive grain increases and surging inventories, China's three major staple grains have been net imported for five consecutive years. Data showed that last year China's grain imports exceeded 100 million tons for the first time. The three major grain varieties of rice, wheat and corn had net imports for five consecutive years, while imports of corn substitutes such as sorghum and DDGS (corn distillers dried grains with solubles) also grew substantially in recent years.
On one side were "domestic grain filling the warehouses" under the "twelfth consecutive bumper harvest"; on the other side was imported grain at low prices breaking 100 million tons again. The inversion of domestic and international prices highlighted the lagging competitiveness of Chinese agriculture and further tightened the nerves of grain policy adjustment.
Only by transforming grain reform from the demand side to the supply side can it adapt to the new normal of China's grain production. On November 3, the "Recommendations of the Central Committee of the Communist Party of China on Formulating the Thirteenth Five-Year Plan for National Economic and Social Development" was released, proposing for the first time the implementation of a farmland rotation and fallow system in some areas to alleviate severe overexploitation of water sources and pressure on land resources. Carrying out pilot farmland rotation and fallow programs allows land that has toiled for thousands of years to rest, and plays a very important role in restoring soil fertility, regulating the balance of grain supply and demand, and ensuring food security. At the same time, it is also the premise and guarantee for implementing "storing grain in the land and storing grain in technology."