How can farmers' enthusiasm for growing grain be increased? Policy coordination is key
From 2004 to early 2014, under the influence of the minimum purchase price policy, the market prices of China's three major grains - rice, wheat and corn - rose steadily. However, since the second half of 2014, the lack of momentum for grain price increases has gradually become prominent, and especially since the new grain came onto the market in 2015, grain prices have shown a comprehensive downward trend. The decline in the prices of the three major grains shows that China's grain market supply and demand has taken on a new pattern, and it also reflects that the grain support policy and the macro-control policy system for important agricultural products urgently need adjustment.
Main reasons for the decline in grain crop prices in recent years
(1) Supply fundamentals in the domestic market: output has increased year after year, and grain inventories remain high. Loose supply and demand fundamentals are the root cause of this round of grain price declines. Since 2004, China's grain output has increased year after year. At the same time, after years of minimum purchase price procurement, China's grain inventories have also hit a record high. Continuous purchasing and storage have brought enormous inventory pressure to China's grain.
(2) Supply and demand fundamentals in the international market: supply is generally loose, and grain prices remain sluggish. Depressed international grain prices and relatively large price gaps are the external triggers for the decline in China's grain prices. Affected by the macroeconomic situation and supply and demand fundamentals, international grain prices have successively entered a downward channel since 2011. From January 2011 to March 2016, the after-tax landed prices of international rice, wheat and corn fell by 23.7%, 42.2% and 41.0% respectively.
(3) The superposition of "demand-driven" and "non-demand-driven" imports: domestic grain prices come under pressure against the backdrop of price inversion. The increase in the scale of imported grain is the transmitter that triggered the decline in domestic grain prices. Because the price gap between domestic and international markets is obvious, on the basis of the original "demand-driven" imports, the scale of "non-demand-driven" grain imports has expanded significantly. The impact of imported grain on the domestic market: on the one hand, it has replaced the consumer demand for domestically produced grain; on the other hand, it has clearly suppressed domestic grain prices.
(4) Policy factors and price transmission among varieties, across upstream and downstream industries, and among regions have led to a broad decline in grain prices nationwide. This is mainly reflected in three aspects: first, price transmission among grain varieties, prominently shown in the fact that the continuous increase in feed demand for grain has made substitutability among varieties and price transmission more prominent. Second, price transmission along the upstream and downstream of the industrial chain has intensified the magnitude of the grain price decline. Third, the impact of price linkages across regions.
Responding to the decline in grain prices requires stronger policy coordination
As a country with a large population and a major agricultural country, food security has always been the foundation of China's economic, social and agricultural stability. The recent decline in grain prices has also had a profound impact on China's agricultural development, especially food security, promoting increased grain output, increasing farmers' incomes, and ensuring the stable development of agriculture.
Fundamentally speaking, ensuring an effective supply of grain and increasing the incomes of grain-growing farmers cannot rely on a single price support policy as a long-term solution. The fundamental approach still requires improving the comprehensive grain production capacity and the comparative returns from growing grain. To respond to the current objective reality of sluggish grain prices, insufficient demand, declining returns for participants across the industrial chain, and high national reserves, it is necessary, within the framework of improving the existing price support policy, to achieve simultaneous efforts on both the supply side and the demand side of grain production through policy coordination: it is necessary not only to innovate effective supply to promote consumption upgrading and enhance output efficiency by raising the supply level, improving supply efficiency, and optimizing the supply structure; at the same time, it is also necessary to further strengthen demand management, increase policy support in grain production, circulation, processing and trade, strengthen the coordination and cooperation of various policies, maintain policy resolve, and give full play to the synergistic role of policies. This can not only improve the implementation effect of the price support policy, but also fundamentally raise the enthusiasm of grain-growing farmers and the returns of grain-growing farm households, thereby achieving the goal of ensuring food security.
(1) Give play to the decisive role of the market in the price formation mechanism for agricultural products, and improve the market regulation policy for agricultural products.
1. Improve the existing grain support price system.
First, improve the minimum purchase price policy for grain. Taking into comprehensive consideration factors such as China's grain production costs, opportunity returns from growing grain, the carrying capacity of purchasing entities, market supply and demand, international grain prices and the overall operation of prices, reasonably set the minimum purchase price levels for different grain varieties, and explore differentiated policies in light of different demand and regional economic development differences. Second, improve the new mechanism of "market-based purchase" plus "subsidies" for corn. Establish a mechanism under which the temporary purchase and storage price can rise or fall. Use the supply and demand surplus of the year as the reference standard for the total amount of purchase and storage, and determine the quantity of temporary purchase and storage. Strengthen supervision of temporary purchase and storage. Third, standardize the mechanism for policy-oriented grain auction transactions. Scientifically determine the planned volume released to the market for market-based purchase and storage and for adjusting state reserve auctions, as well as the reserve price for transactions. Further improve the detailed rules for open market transactions and the supervision and inspection mechanism.
2. Build a target price policy system for important agricultural products, and accelerate reform of the market price formation mechanism. In advancing the target price, attention should be paid to the coordination and cooperation of the entire policy system. According to China's national conditions, at present, with target price subsidies as the core, pilot work on target price insurance policies and marketing loans should also be carried out for some varieties, and after gradually accumulating experience, it should be extended to other varieties, so as to build a target price policy system for grain and agricultural products with Chinese characteristics.
3. Establish and improve a market risk control mechanism, and attach importance to the use of market-based mechanisms in price risk management for agricultural products. First, explore and develop average income insurance and other products for important agricultural products, provide farmers with insurance products of an income guarantee nature, and disperse agricultural product price risks. Second, carry out training on agricultural product price risk control and pilot risk management projects among large-scale agricultural product producers (such as agricultural enterprises, specialized large households, family farms, etc.). Third, create a favorable market operating environment to promote the functioning of the risk management market, and establish an agricultural product price risk management system in which policy support and market mechanisms coexist.
(2) Improve the quality and efficiency of agricultural product production and supply, and strengthen supply-side structural reform
1. Adapt to the upgrading of consumer demand and create new effective
supply. First, ensure the supply level. Implement the new food security strategy of basic self-sufficiency in grain and absolute security of staple foods, and ensure that the comprehensive production capacity of high-quality rice and wheat continues to improve. Second, optimize the supply structure. Further adjust and optimize the regional productivity layout, the ternary structure of grain, cash crops and feed, and the structure of planting and breeding, and build an agricultural production and supply pattern that matches the carrying capacity of resources and the environment and the trend of upgrading the consumption structure. Third, promote the diversification and quality improvement of supplied varieties. Vigorously develop green agriculture, specialty agriculture and brand agriculture, strengthen the research, development and promotion of high-quality agricultural product varieties, establish a grading and classification standard system, implement diversified and differentiated production, increase the added value of agricultural products, and promote agricultural quality improvement and efficiency enhancement.
2. Rely on innovation-driven development to reduce resource supply costs and improve agricultural production efficiency. First, on the basis of holding the red line for cultivated land, improve the quality of cultivated land, build high-yield and stable-yield farmland, focus on strengthening the construction and improvement of cultivated land quality in major grain-producing areas and among large-scale operating farm households, and improve farmland infrastructure. Second, centering on improving labor productivity, accelerate scientific and technological progress, effectively increase investment in agricultural scientific and technological innovation, agricultural extension education, and the cultivation of new-type farmers, promote scientific and technological innovation in the seed industry, and steadily advance various forms of scale operation (land, labor factors, technical services, etc.). Third, centering on improving resource use efficiency, comprehensively promote key technologies such as labor-saving, land-saving, water-saving, fertilizer-saving, pesticide-saving, seed-saving and energy-saving technologies, accelerate the pace of mechanization, reduce the cost of production factors, and improve output efficiency.
3. Build a safety net for farmers' incomes and mobilize enthusiasm for increasing the effective supply of agricultural products. Safeguarding the basic returns of grain-growing farmers is the fundamental basis for mobilizing their enthusiasm. First, establish and improve a universal subsidy system covering all grain-growing farmers. Second, improve the benefit compensation mechanism for major grain-producing areas. This includes two levels. The central government, according to the total grain production in major producing areas, provides benefit compensation through fiscal transfer payments, including both compensation for expenditures by major producing areas in fiscal support for public affairs related to grain production, and special support for building comprehensive grain production capacity in major producing areas; major grain-selling areas
provide targeted support and compensation through linked purchase and sales with major producing areas. This includes compensation based on the total transferred-in volume and subsidies for transport, storage and other aspects. Third, increase support for new-type grain production entities such as large-scale grain-growing households. Subsidies for large-scale operating farm households should focus on subsidies for pre-production financing loans for preparatory cultivation, subsidies during production for the purchase and maintenance of agricultural machinery, technology extension services, and unified prevention and control of pests and diseases, as well as subsidies for post-production handling facilities such as drying and drying yards and for marketing. At the same time, increase financial support for large-scale grain-growing farm households, with the key being to improve the convenience and accessibility of loans.
4. Improve the operating efficiency and overall competitiveness of the supply system. Accelerate the transformation of cross-provincial agricultural product logistics corridors and form a convenient, efficient and economical modern logistics system. Support the construction of large agricultural product logistics nodes such as coastal ports, inland river wharves and railway stations. Strengthen cooperation between major production and sales areas of important agricultural products. Guide purchasing, sales and transport enterprises to operate jointly and build cross-regional agricultural product logistics corridors.
(3) Promote consumption, regulate trade, and optimize demand management policies
1. Accelerate the development of the agricultural product processing industry. First, accelerate the pace of digesting grain reserve inventories through auctions or targeted sales. Second, adjust the processing and consumption structure and give full play to the role of grain supply and demand balance as a regulator. Third, in conjunction with implementing the subsidy policy for processing agricultural products at the place of origin, provide appropriate subsidies to enterprises that use grain auctioned from state reserves for processing. Fourth, appropriately relax restrictions on grain biomass energy processing to increase corn consumption.
2. Optimize trade regulation policies. First, adjust the trade structure and clarify the priority order for opening markets for important agricultural products. Staple foods must achieve a balance between total supply and demand. Adjust trade policy according to the import priority order, reasonably determine the import scale of major agricultural products, strengthen the combination of imports and reserves, and establish an import-reserve adjustment mechanism. Second, launch a trade adjustment assistance system in response to damage to relevant industries.