Corn price reform cannot stop at abolishing the temporary storage policy

Market-oriented reform of corn is not simply about abolishing temporary purchase and storage; it must, on the basis of advancing the separation of price and subsidy and exiting the policy-driven market, activate the enthusiasm of all kinds of social entities to enter the market and purchase. However, cultivating diversified purchasing and storage entities to enter the market faces real difficulties, because grain purchasing requires large amounts of capital. In addition, the planting structure must be adjusted to form a rational production layout, and varieties that are well-suited to the market must be developed.

This year is the first year of abolishing the temporary corn storage system, and also the most critical time for the market-oriented reform of corn purchasing. In my view, market-oriented reform of corn is not simply about abolishing temporary purchase and storage; it must, on the basis of advancing the separation of price and subsidy and exiting the policy-driven market, activate the enthusiasm of all kinds of social entities to enter the market and purchase.

In the Northeast, in the early stage of the autumn grain purchasing season, farmers found it "difficult to sell grain" and corn prices fell sharply; now grain purchasing and storage enterprises are facing "difficulties in outward transport" and corn prices have risen slightly. Because the domestic corn market still has an overall supply exceeding demand, and because the state abolished the temporary purchase and storage policy this year, in the long run, corn prices are bound to trend lower relative to last year. But at present, as temperatures gradually drop, drying becomes more difficult, and transport is affected by rain and snow, causing short-term price increases. Between rises and falls, farmers are caught in a dilemma.

From the perspective of upstream and downstream industries, it is also a dilemma. After the temporary storage system was abolished, corn prices continued to decline, and farmers' enthusiasm was affected to some extent, especially for some large-scale growers. But it is beneficial to breeding enterprises and deep-processing enterprises, improving the overall competitiveness of the industrial chain. Sichuan Province, a major livestock province, is a beneficiary of the new purchasing policy, and the feed costs of breeding farmers have dropped significantly. The corn deep-processing industry has also benefited greatly from destocking, and overcapacity has been alleviated.

From the perspective of regulation, there is a dilemma concerning food security. Grain prices connect producers on one end and consumers on the other. At present, food security overall remains in a tight balance. The purpose of price reform is to safeguard food security in accordance with market laws. First, maintain a basic balance between grain supply and demand, and prevent corn inventories from increasing rapidly again; second, prevent farmers' incomes from falling sharply after grain supply becomes loose, and prevent output from declining sharply. Currently, corn prices in the Northeast are basically on par with the landed price of imported corn, gaining international competitiveness for the first time in many years. Seen in this light, regulation has achieved initial results.

The ultimate purpose of separating price and subsidy is to let the market determine prices. To break through the dilemma in reform, the first step is to improve diversified market entities, that is, reasonable purchasing channels. In 2004, relevant departments proposed completely liberalizing grain prices, but as temporary storage prices continued to rise, only Sinograin was purchasing, and private enterprises had in fact withdrawn from the market. Currently, abolishing the temporary storage policy is not a problem, but actively cultivating diversified purchasing and storage entities to enter the market faces real difficulties, because grain purchasing requires large amounts of capital. State-owned purchasing entities have funding guarantees, while other entities find it harder to obtain guarantees. Price rises and falls are market laws, but difficulties in selling grain should never occur.

Second, there must be a rational production layout, which requires adjusting the planting structure. China's corn planting stretches from the Southwest to North China to the Northeast, and product sales outlets are also relatively concentrated. In the United States, agricultural planting is divided into the Corn Belt, Cotton Belt, Dairy Belt, and so on, and they rarely conflict with one another. For corn planting, there is an internationally recognized golden corn belt. Against the background of high corn output and inventories, the corn planting returns in advantageous production areas should be kept basically stable. For non-advantageous areas, subsidies can be given for switching to other crops. In the long run, non-advantageous areas still need to find superior crops suited to local conditions, and appropriately develop vegetables, forest fruits, potatoes, and so on.

For advantageous corn production areas, it is not enough to rely only on subsidies of one or two hundred yuan per mu; varieties that are well-suited to the market must also be developed. At present, demand for grain corn is shrinking, while the proportion of silage corn and fresh-eating corn is increasing. Take fresh-eating corn as an example: with the development of urban agriculture, various types of fruit corn are highly sought after by consumers, and prices are far higher than ordinary corn. Whole-plant silage corn is also welcomed by large-scale breeders, and its market price is relatively good. This kind of market demand is precisely the guiding light for future corn structure adjustment.