Grain imports must not endanger farmers' livelihoods
How to activate the market entities that ought to emerge is the biggest problem facing the reform of China's corn purchase and storage system.
At the "2016 China Grain and Oil Wealth Forum - Chagan Lake Summer Summit" and the "Jilin Province Grain Production and Marketing Cooperation Fair" held on August 11, Chen Xiwen, deputy director of the Economic Committee of the National Committee of the Chinese People's Political Consultative Conference and former director of the Office of the Central Rural Work Leading Group, pointed out that the reform of the corn purchase and storage system must first restore the role of the market mechanism in price formation, while improving the allocation of subsidies in the farmers' production process, and most importantly, activating various market entities other than Sinograin.
According to the introduction, when the temporary storage corn purchase policy was introduced in 2007, the temporary storage price of corn was 0.7 yuan/jin, basically in line with the market supply and demand relationship. But in the following years it gradually departed from the market supply and demand relationship, shifting to giving priority to protecting farmers' interests, and the purchase price rose all the way to 1.12 yuan/jin.
He said that the temporary storage purchase and minimum purchase price policies actually gave farmers a misunderstanding, making farmers know before planting how much they could sell for after harvest, so they planted boldly and confidently, and eventually turned corn into an ironclad crop, to the point that now the corn planting area has to be reduced.
Chen Xiwen believes: "Any commodity production that must be put on the market cannot avoid market risks. Therefore, as for what the price of corn will be at the end of this year, I think no one can calculate it precisely right now, but the price of imported corn or corn substitutes at the port of arrival, and the corn price derived backward from the minimum cost-benefit price of primary corn processing products, can be used as the basis for judging this autumn's corn market price." Chen Xiwen believes that temporary storage corn purchase actually put the subsidies to farmers into the price, and this subsidy method kept pushing the market price higher, until it became the highest price on the market, and the market completely became a policy market. Therefore, it is very necessary, and also an urgent task, to now separate subsidies from the price and restore the role of the market mechanism in grain pricing.
Chen Xiwen stressed that the most important thing at present is to step up publicity so that everyone realizes what determines prices under market economy conditions, and at the same time change the method of subsidizing farmers' income through prices, shifting to green box subsidies, to blue box subsidies, to subsidies not restricted by WTO rules, and further increase farmers' income.
The ultimate purpose of the reform of the corn purchase and storage system is to restore the decisive role of market pricing in the formation of grain prices. To have market pricing, the price must be formed by the market; to form a market, there must be enough market entities entering the market.
Chen Xiwen pointed out that in the years since Northeast China implemented temporary storage corn purchase, many market entities have already become accustomed to going to Sinograin to bid for grain. There is plenty of grain in the state treasury, so they no longer collect grain themselves. So how to activate the market entities that ought to emerge is the biggest problem facing the reform of the corn purchase and storage system.
Chen Xiwen believes that activating market entities other than Sinograin first requires solving two problems:
The first is to clarify how the total corn inventory of more than 500 billion jin will be digested, how it will be handled, what the structure is, and what to do at each stage, so that market entities can enter the market with confidence.
"The second is to seriously solve the loan difficulties faced by qualified market entities outside the Sinograin system that are willing to enter the market. If this problem is not solved, then after autumn, although the corn price will have come down, it will still be the situation of Sinograin alone continuing to purchase." Chen Xiwen stressed.
The purpose of advancing the reform of the agricultural supply-side structure is to improve the comprehensive efficiency of agriculture and enhance the international competitiveness of agricultural products, and advancing the reform of the corn purchase and storage system is an important aspect of advancing the supply-side structural reform of agriculture.
Chen Xiwen pointed out that we should view the purchase and storage system reform more completely, and regard it as a major juncture in China's grain production, supply and marketing, and in restoring the role of the market mechanism.
"For example, the phenomenon of oversupply and prices being higher than the international market is not only in corn, cotton, sugar, and oil, but also includes wheat and rice. Therefore, from advancing the reform of the corn purchase and sales system, we should explore experience and explore a path that ensures the smooth development of agriculture, ensures the continuous increase of farmers' income, and can also effectively ensure national food security." Chen Xiwen said.
Regarding the view of advocating more grain imports, Chen Xiwen said: "Imports are necessary, but the volume of grain imports must not endanger our country's agricultural security, and must not endanger the livelihoods of our country's farmers. This is the most basic principle."