How to gnaw through the hard bone of agricultural product price reform
This year's corn procurement will be adjusted from the previous temporary state reserve to a new mechanism of "market-based procurement plus subsidies", indicating that China's price reform for bulk agricultural products has taken another key step. For China, the path of price reform must conform to national and agricultural conditions. Specifically, this means letting prices return to the market, using price as a means to let the market play the decisive role in resource allocation; at the same time, ensuring food security and effectively safeguarding farmers' interests. Both the market and the government hands must be used well, all difficulties must be overcome, and the pass of agricultural product price reform must be successfully cleared.
The much-watched reform of agricultural product prices is gradually entering deep waters. Recently, the briefing on the reform of the corn purchase and storage system, jointly held by the National Development and Reform Commission and other departments, made clear that this year's corn procurement will be adjusted from the previous temporary state reserve to a new mechanism of "market-based procurement plus subsidies". At this point, following the 2014 pilot reform separating price from subsidy for cotton and soybeans, and the 2015 cancellation of temporary state reserve for rapeseed, corn, the highest-yielding grain crop in China, has also embarked on the path of price reform. This means that China's price reform for bulk agricultural products has taken another key step.
The path of price reform for agricultural products, especially bulk agricultural products such as grain, cotton, oil and sugar, has been anything but ordinary. From comprehensive price controls in the era of the planned economy, to the gradual liberalization of "unified purchase and unified sale" after reform and opening up, to the parallel operation of policy-supported procurement through minimum purchase prices and temporary state reserves alongside market-based procurement, China's bulk agricultural products have formed a unique phenomenon of being half policy and half market. As the gap between policy-based procurement and market prices grew larger and larger, the pressure of the half-policy, half-market situation was considerable, and it eventually evolved into a "policy market". For example, cotton before the 2014 target price reform and corn in recent years could only be purchased at high prices and piled into warehouses, while enterprises used imported products or substitutes, and the market's function of regulating prices failed.
On one side, the "policy market" was difficult to sustain; on the other, the market's demand for straightening out prices was growing day by day. The price reform of agricultural products thus began under this pressure of reverse coercion and proactive action. From the perspective of the production source, although the "policy market" safeguarded farmers' returns to a certain extent, it also encouraged farmers to "keep their heads down and farm without asking about the market", making it difficult for them to become true market entities; from the perspective of the sales market, the "policy market" deviated from the normal track of price formation and did not reflect the real situation between market supply and demand and costs, ultimately causing the supply of agricultural products to never "grow up"; from the perspective of the processing link, the "policy market" severed the natural relationship between processing enterprises and the market, pushed up enterprise costs, and caused "chain blockages" in the agricultural product industry chain. Moreover, the long-term "policy market" also increased the fiscal burden and raised the risk of exceeding WTO subsidy rules.
Price reform is imperative, but that does not mean it can be carried out lightly. In this regard, we once had profound historical lessons. Therefore, should we pursue getting it done in one step, or proceed step by step and tackle the easy parts first before the difficult ones? Should we advance on a single front, or consider things comprehensively and adopt a combination of measures? This is not only a technical question, but also a core question involving the purpose of price reform and whether the reform can succeed. Fortunately, after long exploration, we are now finding a path of price reform that conforms to national and agricultural conditions.
This path is, first, to clearly define the purpose and principles of price reform: let prices return to the market, and use price as a means to let the market play the decisive role in resource allocation; at the same time, give full play to the role of the government hand, ensure food security, and safeguard farmers' interests. Taking the safeguarding of farmers' interests as the starting point and ultimate goal of price reform and even rural reform is not only the key to the success of price reform, but also the key to the success of rural reform.
Following this top-level design, in terms of reform steps, we adopted the approach of carrying out pilots first and then rolling them out comprehensively after the pilots succeeded; in terms of varieties, we first selected bulk products that are not universally planted, such as cotton and soybeans; in terms of subsidy methods, we chose the method of separating price from subsidy, that is, reasonably determining the target price and giving subsidies for the price difference between the purchase price and the target price. From the** cotton and Northeast soybean pilots, this method achieved the expected results, and the path of agricultural product price reform with Chinese characteristics is also becoming increasingly clear.
Agricultural product price reform is both a hard bone to gnaw and an unavoidable path for modern agriculture. No matter how great the difficulties, this pass must be cleared. In this regard, the reason why agricultural product price reform has achieved results lies both in the reform courage of crossing the river by feeling the stones and in highlighting top-level design. From the very beginning, the direction, goals and path were made clear. It dared to innovate while respecting practice, did not take a one-size-fits-all approach, and avoided blindness and shocks.