What problems does the current agricultural structural adjustment face?

Since last year, the Ministry of Agriculture has successively issued policy documents such as the "Guiding Opinions on Further Adjusting and Optimizing the Agricultural Structure", the "Opinions on Corn Structure Adjustment in the Sickle Bay Area", the "National Agricultural Sustainable Development Plan", and the "Guiding Opinions on Further Adjusting and Optimizing the Planting Structure". Localities, in implementing the spirit of the central government, have intensively introduced guiding plans for adjusting the agricultural structure and transforming the development mode, steadily advancing structural adjustment and optimization, and achieving notable progress. The number of pilot counties for the national grain-to-forage conversion program has expanded from 30 to 100, and the area of corn reduction is expected to exceed 30 million mu, the first decrease in nearly 13 years; hog inventories in the southern water-network areas have been reduced by 16 million head, and the trend of relocating breeding to areas with greater environmental capacity is evident.

While recognizing these achievements, we should also be clearly aware that the deep-seated contradictions and problems constraining structural optimization and the transformation of the development mode still exist, mainly manifested as follows:

First, from the broader environment, the situation in which China's agriculture is squeezed by the "double ceiling" of costs and prices will be difficult to change in a short time. As China's urbanization accelerates, labor costs will continue to rise, the opportunity cost between farming and working in industry or services tends to expand, and the trend of agricultural labor continuing to shift to the secondary and tertiary industries becomes more pronounced. However, affected by subsidy policies, farmers expect land to appreciate, land transfer prices climb year by year, placing enormous pressure on large-scale growers and hindering the pace of scale operation and structural adjustment. As for the prices of bulk agricultural products, affected by international oil prices and grain trends, the prices of bulk grain products in the United States, Australia, Brazil and other countries will not rise rapidly; if domestic grain and soybean prices are to maintain stable production and current output, continued reliance on price support, subsidies and other means is needed. At the same time, agricultural resources and the environment are overburdened, and the land urgently needs rest and recuperation, which also conflicts with our ever-increasing food demand, especially demand for vegetable cultivation and livestock and poultry breeding, which have a large environmental impact, and this will become even more prominent as urbanization accelerates. Structural optimization and the transformation of agricultural development modes urgently require revolutionary means to break through.

Second, there is a certain gap between the current adjustment goals and real demand. The current agricultural structural adjustment goals proposed by China, namely "two guarantees, three stabilities, two coordinations" (that is, guaranteeing staple grains and guaranteeing cereals; stabilizing the self-sufficiency levels of cotton, edible vegetable oil and sugar; achieving coordination between vegetable production and demand, and coordination between forage production and livestock breeding), are correct in the general direction from the perspective of national security. But from the perspective of supply-demand balance and farmers' employment and income growth, they probably do not touch the essence. Our current policy considerations are formulated under conditions of information asymmetry. For example, last year the pressure of corn inventories was enormous and the finances could not bear it; the central government could hear feedback from large enterprises such as Sinograin. But the reality is that, apart from varieties such as rice and wheat for which the government stabilizes the market through support purchases, the production and sales of many crops encounter the problem that "whatever you plant, you lose money on." This year the Ministry of Agriculture research teams also reported that Shanxi adjusted its structure to plant millet, and as a result the price of millet fell; some areas in Northeast China adjusted their structure to plant watermelons, and as a result the price of watermelons fell; and so on. These phenomena, which on the surface appear insufficiently connected, reflect a profound problem: China's agricultural products have already entered an era of "aggregate surplus and partial imbalance." As early as 2002, China's per capita vegetable availability had already reached 4 times the world average. At present, apart from a few varieties such as beef, mutton and milk, China's per capita availability and per capita consumption levels of major agricultural products rank among the highest in the world, and per capita waste is estimated to rank first in the world. In the long term, the situation of aggregate oversupply of China's agricultural products (except for crops such as oilseeds) will persist, which brings a very severe challenge to structural adjustment. A healthy agricultural structure conducive to sustainable development is by no means only based on the level of food security; it should be conducive to resource conservation and optimal efficiency.

Third, from the perspective of the means of guiding structural adjustment, most rely on fiscal subsidies and price subsidies, and the adjustment path is single. From the implementation process of this new round of structural adjustment, taking corn as an example, it was mainly achieved by lowering and canceling the temporary corn storage purchase policy and reducing farmers' expected returns from planting corn. Although canceling the temporary corn storage purchase policy played an important role in structural adjustment and destocking, the blow to large-scale growers in the short term was also enormous; they had purchased corn-planting equipment and mastered the full set of techniques, and the losses caused by the sudden transformation could only be borne by themselves. This kind of incoherent and abrupt policy change is not conducive to cultivating new-type farmers and the sustainable development of agriculture. From the perspective of developed areas, adjusting the planting structure mainly relies on increasing subsidies linked to varieties. For example, Suzhou and Shanghai's support policies for grain and vegetables add more than 400-500 yuan per mu in subsidies on top of national subsidies. Such targeted subsidies can only be supported by fiscal strength in developed areas, and they fall within the category of amber box subsidies, which easily lead to WTO agreement disputes and are not replicable or sustainable. All these policies are adjustments "in the opposite direction" to market demand and the planting needs of operating entities. As market demand and operating entities' demand for the crops being adjusted continue to increase, the fiscal subsidies needed to adjust the structure will increase in parallel, and when the finances can no longer support them, there may be a return to the results before adjustment.

Fourth, from the perspective of fiscal support for structural adjustment, there is also the problem of scattered projects, leading to the problem of considerable input but low efficiency. Local finance, land, development and reform, water resources and other institutions all played important roles in this round of structural adjustment, but in the implementation process, achieving expected goals through project favoritism exists, with unsmooth linkages and lack of unified planning, causing serious waste and low efficiency.

In dealing with the above problems, we believe that at least the following countermeasures are needed, but not limited to them:

First, fully grasp the advantages and disadvantages in international competition, recognize the complexity and long-term nature of the structural adjustment problem, and study and formulate a long-term mechanism and medium- and long-term plan for structural adjustment, avoiding treating the head when the head hurts and the foot when the foot hurts. The situation in which the prices of crops such as wheat and soybeans on the international market are lower than the domestic market will not change in the short term, and the gap tends to widen. If the gap further widens, although fiscal subsidies can be increased to boost production capacity, subsidies are constrained by the WTO legal framework and cannot be increased without limit, so consideration must be given to reducing costs through scale and mechanization to improve competitive advantage.

Second, consider agricultural structural adjustment from both the supply side and the demand side. China's agriculture is not only imbalanced on the supply side; the imbalance on the demand side is even more obvious. For ordinary urban residents, China's per capita food availability is higher than the world average, its waste level ranks among the highest in the world, and the cost of obtaining food is lower than in developed countries. But for people in poor areas, food prices pose a challenge to their livelihoods. This needs to be solved through a "structural" supply-demand plan, which is also a common means in developed countries. For example, although wheat and corn prices in the United States are low, there are still poor people who cannot afford their food needs. In the 2014 U.S. farm bill budget, 75% of the budget was still allocated to "supplemental nutrition support", mainly food subsidies targeting groups such as disadvantaged residents and students, and spending on environmental governance was increased. Therefore, structural adjustment should not be a purely supply-side adjustment; it should be a two-way adjustment of supply and demand. Only when our agricultural products return to rational prices can most farmers benefit from their operations, stabilize the agricultural employed population, and promote the sustainable development of agriculture.

Third, reform the institutional mechanisms of structural adjustment. At present, the main reasons making structural adjustment difficult to advance, apart from market problems, are problems with government support means. At present, farmers and growers nationwide all believe that the state will continue to increase agricultural subsidies, and expectations for policy support are very high. The structural adjustment being implemented also uses subsidy means - some increase subsidies to growers, and some are price subsidies. But it must be seen that the relevant subsidies implemented in China, especially subsidies linked to varieties, distort market prices and without exception increase land costs and overall costs; the more subsidies, the faster rents rise. After the temporary corn storage policy was canceled in Northeast China this year, rents also fell accordingly. Therefore, what contractors leave to growers is a fixed profit; the more subsidies, the higher the rent, and all risks are borne by the growers, which is very unfavorable for cultivating new-type farmers. From the experience of developed countries, more and more agricultural subsidies and policies target people rather than industries, and facts have proven this to be an important means of enhancing agricultural competitiveness. By increasing subsidies to low-income rural populations and increasing their employment, gradually freeing land contractors from dependence on land rent, and making planting operators truly masters of the market, costs will be greatly reduced, efficiency and competitiveness improved, and the problem of structural adjustment will be readily solved.