How can the grain industry push forward supply-side structural reform?
A few days ago, the National Food Administration issued the "Guiding Opinions on Accelerating the Supply-Side Structural Reform of the Grain Industry" (hereinafter referred to as the "Opinions"), and the top-level design for the supply-side structural reform of the grain industry was officially unveiled.
In recent years, the domestic grain sector has seen the simultaneous emergence of the "five highs" - high output, high procurement volume, high prices, high imports, and high inventories - with prominent phased and structural contradictions between supply and demand. As the "Opinions" mention: "At present, domestic grain market operations are marked by intertwined multiple contradictions and the superposition of new and old problems. The characteristics of phased oversupply are obvious for some grain varieties, the effective supply of grain circulation services and processing and conversion products is insufficient, the task of grain 'de-stocking' is arduous, and the current procurement and storage system needs to be reformed and improved at a faster pace, among other things. This fully demonstrates that the principal contradiction in China's grain sector has changed from a total-volume contradiction to a structural contradiction, and the principal aspect of the contradiction lies on the supply side."
How should the pace of supply-side structural reform in the grain industry proceed? And what are the priorities? Recently, reporters interviewed relevant responsible comrades of the National Food Administration and other experts to interpret the "Opinions."
Vigorously develop the industrial economy
Grain has the dual attributes of a public good and an ordinary commodity. Correspondingly, the grain industry also has two major missions: "allocating resources to ensure security and developing industry to invigorate the economy."
At the 2016 National Grain Circulation Work Conference held earlier this year, Ren Zhengxiao, Director of the National Food Administration, proposed that the "13th Five-Year Plan" period is a transition period for fully unleashing the vitality of the grain industry economy. He said: "On the one hand, we shoulder the responsibility of ensuring supply, benefiting the people's livelihood, and providing a bottom line, and we must do a good job in procurement and storage, manage reserves well, and stabilize the market; on the other hand, we shoulder the heavy task of invigorating circulation, expanding domestic demand, and stabilizing growth, and we must vigorously develop the grain economy and promote the sustained and healthy development of the national economy."
A department head of the National Food Administration who participated in the drafting of the "Opinions" told reporters that, with economic and social development and the improvement of people's living standards, the consumer demand of urban and rural residents for mid-to-high-end and personalized grain and oil products has increased significantly, and demand for deep-processed grain products has grown strongly. However, the domestic supply structure of grain products has found it difficult to match this, mainly manifested in a relatively large supply of low-end grain products and ineffective supply, and a relatively small supply of mid-to-high-end products and deep-processed products. Some dedicated functional products and deep-processed products still need to be imported. Therefore, vigorously developing the industrial economy and providing grain products needed by society has become one of the main goals and key tasks of advancing supply-side structural reform in the grain industry, and this has once again been emphasized in the "Opinions."
Therefore, developing the grain industry economy and providing products needed by society is currently the reform content most closely aligned with the grain industry, and is a direct supply-side reform.
At the 2016 Grain Science and Technology Activity Week held in May, Yue Guojun, an academician of the Chinese Academy of Engineering, gave a set of comparative data: at present, China has fewer than 1,000 corn processing products, while the United States already has about 3,500 corn processing products. In fact, market demand for deep processing of corn is relatively strong, and for enterprises the value-added margin of such products is also relatively large, but at present domestic demand and supply are not matched.
The "Opinions" propose vigorously developing the grain industry economy by starting from aspects such as increasing the supply of diversified, customized, and personalized grain products, accelerating the development of deep processing and conversion of grain, supporting and strengthening backbone grain enterprises, implementing a brand development strategy, promoting the clustered development of the grain industry, developing a circular grain economy, accelerating the phasing out of outdated production capacity, and developing new forms of grain business. Through developing the industrial economy, promote the organic linkage of production, circulation, consumption, and other links, and improve the adaptability and matching degree of supply to demand.
Developing the industrial economy is a very important part. Relevant experts emphasized that the industrial economy can be linked with the front end. What kind of grain varieties enterprises need can be communicated to farmers through giving play to the guiding role of circulation over production, telling them what is good to sell; if an enterprise's products connect well with the market, it can also obtain relatively good returns.
Shore up circulation "weak links" and improve service levels
In advancing supply-side structural reform in the grain industry, it is not only necessary to "adjust structure," "transform methods," and "strengthen industry"; "shoring up weak links" is also a required lesson.
This responsible person said that at present, the construction of China's modern grain logistics facilities is relatively lagging, informatization development is slow, and the backward situation of high logistics costs and low efficiency has not been fundamentally changed, making it difficult to meet the practical needs of rapid nationwide collection and distribution, efficient delivery, smooth circulation, and precise regulation of grain resources.
To promote the modernization of grain circulation capacity, the above obstacles and bottlenecks must be broken through. In 2015, with the approval of the State Council, the National Development and Reform Commission, the Ministry of Finance, and the National Food Administration jointly issued and implemented the "Plan for the Construction of the Grain Procurement, Storage, and Supply Security Guarantee Project (2015-2020)," comprehensively advancing the construction of the "Grain Security Project." At present, provinces and municipalities are also advancing the intelligent upgrading and transformation of the "Grain Security Project," promoting the application of modern information technology in all links of grain circulation.
In April this year, the National Food Administration also issued the "Opinions on Standardizing Informatization Construction in the Grain Industry" to regulate problems in the informatization construction of the grain industry such as unbalanced development, non-standard construction, inconsistent standards, weak replicability, loose integration with business, low investment efficiency, isolated advances, insufficient interconnection, and emphasis on construction over operation and maintenance. Experts pointed out that this is intended to accelerate the elimination of "information islands" through top-level design, realize interconnection, and enable effective docking and compatibility of information.
The "Opinions" issued this time further clarify that the "weak links" in grain circulation should be shored up by starting from aspects such as comprehensively advancing the construction of grain storage facilities, accelerating the construction of a modern grain logistics system, comprehensively promoting industry informatization, and strengthening the building of grain emergency supply capacity.
Improving the level of socialized services in grain circulation is also one of the important tasks of supply-side structural reform in the grain industry. The "Opinions" point out that the socialized service level of grain circulation should be accelerated by starting from aspects such as advancing the construction of post-production grain service centers, improving the "reassuring grain and oil" supply system, improving the grain quality and safety guarantee mechanism, and enhancing the level of market information services.
Experts said that promoting the construction of post-production grain service centers is intended to provide comprehensive and diversified high-quality services for new agricultural business entities and strengthen the linkage between production and procurement and storage. Therefore, developing the industrial economy, improving the level of socialized services, and shoring up the weak links in the modernization of circulation capacity constitute an organic whole and require coordinated planning and coordinated advancement.
Improve the procurement and storage system and mechanisms
How to fully give play to the guiding and feedback role of circulation over production and promote the adjustment and optimization of grain planting structure is also a key task of supply-side structural reform in the grain industry. The "Opinions" clarify that the grain procurement and storage system must be reformed and improved, and that we should "continue to implement and improve the minimum purchase price policy for rice and wheat, and actively and steadily advance the reform of the corn procurement and storage system."
This responsible person pointed out that reforming and improving the grain procurement and storage system is essentially about further rationalizing the price formation mechanism, letting prices truly be determined by market supply and demand, and at the same time establishing and improving a producer subsidy system to effectively protect farmers' enthusiasm for growing grain. For grain-growing farmers in the three northeastern provinces and the Inner Mongolia Autonomous Region, this year's corn procurement and storage policy has already been adjusted to "market-based procurement" plus "subsidies," meaning farmers sell corn at market prices and the government gives producers a certain subsidy.
Reforming and improving the procurement and storage system, and implementing the provincial governor responsibility system for grain security, are key measures. As early as the end of 2014, the State Council issued the "Several Opinions on Establishing and Improving the Provincial Governor Responsibility System for Grain Security," making comprehensive arrangements for establishing the provincial governor responsibility system for grain security. The "Opinions" once again emphasize "further implementing local government procurement and storage responsibilities." Experts pointed out that this is intended to advance the implementation of local governments' main responsibility for safeguarding regional grain security, better mobilize local enthusiasm, and enable local governments to coordinate planning for grain production, procurement and storage, transportation, processing, sales, and other links, achieving coordinated development.
In addition, the "Opinions" actively advocate the development of "contract grain." This responsible person pointed out that this aims to establish relatively close ties between new agricultural business entities and enterprises, and at the same time, higher prices for higher-quality grain can also guide farmers to adjust their production structure. At present, "contract grain" has already had many cases across the country and has achieved good results. For example, according to media reports, Pioneer and Nestle (China) Co., Ltd. carried out contract grain purchasing in Gansu. The Yinong Farmers' Professional Cooperative in Jinchang City, Gansu, planted nearly 3,000 mu of corn and supplied Nestle on a long-term basis.
The "Opinions" also point out that grain procurement, storage, and processing enterprises will be encouraged to sign purchase contracts with professional cooperatives, family farms, large grain-growing households, and other new agricultural business entities. Grain procurement, storage, and processing enterprises will be encouraged to actively absorb farmers as shareholders through methods such as land management rights, forming a long-term and stable community of interests with shared risks and shared returns.
To further encourage and guide large and medium-sized grain processing enterprises, feed production enterprises, and others to actively enter the market, the "Opinions" clearly propose in the safeguard measures that credit support should be strengthened, financial institutions should be encouraged to innovate financial support methods, improve the efficiency of financial services, broaden enterprise financing channels, and create a favorable financial credit environment.
Experts acknowledged that policy-based procurement is backed by national fiscal expenditure, while the loan threshold for market-based procurement is relatively high. Grain processing enterprises need a relatively large amount of funds for grain procurement. Without credit support, procurement would be difficult to guarantee.