Get rid of the misunderstanding of the subsidy policy of the target price of agricultural products

The agricultural product target price subsidy policy originated from the American Agriculture Act of 1973 and is an important agricultural support policy in the agricultural history of developed countries. In 2014, the No. 1 document of the Central Committee clearly proposed to launch the pilot reform of soybean target price subsidy in the three northeastern provinces and Inner Mongolia, and the pilot reform of cotton target price subsidy in Xinjiang. Since the pilot reform has been carried out for more than a year, there are great disputes in the academic and theoretical circles on the area measurement of the target price subsidy policy, the subsidy space, and even whether to continue to implement the target price subsidy policy. The root cause of the dispute is that there are still many misunderstandings in the domestic understanding of the subsidy policy for the target price of agricultural products. The target price subsidy policy is related to the overall situation of the reform of the price formation mechanism of agricultural products in our country. We must stand at the overall height and correctly understand the target price subsidy policy of agricultural products.

Myth 1: target price and support price cannot coexist.

China has launched the target price subsidy policy for soybean and cotton to replace the temporary collection and storage policy, that is, to replace the supporting price with the target price. on the surface, it seems that the target price and the supporting price can not coexist. So, can the target price and the support price co-exist? The answer is yes. The implementation of the target price subsidy policy must support the price policy. There is no simple substitution relationship between target price and support price. From a practical point of view, as the earliest use of agricultural product target price subsidy policy in the United States, its agricultural product price formation system is mainly composed of three parts: market price, target price and supporting price. Since the implementation of the target price subsidy policy, although the level of target price and supporting price has been adjusted in each period, the supporting price of agricultural products has never been cancelled, which is expressed in the form of non-recourse loan rate. However, it should be pointed out that after the implementation of the target price subsidy policy, the support price level of agricultural products is lower than the original support price level. This is because the original support price level actually contains the income support function of increasing farmers' income. After the implementation of the target price subsidy policy, it is necessary to separate the original income support function of supporting prices, and only retain the function of making up for production costs and ensuring that the interests of farmers are not damaged.

Misunderstanding 2: target price subsidy is only one form of price difference subsidy.

The popular explanation of the target price subsidy policy in China is that the government announces the target price of agricultural products before sowing, and farmers sell according to the market price after the agricultural products are harvested, and the target price subsidy is equal to the difference between the target price and the market price. As a result, some people have the misunderstanding that target price subsidy is equal to price difference subsidy. In fact, the target price subsidy is equivalent to the price difference subsidy only when the support price is cancelled during the implementation of the target price policy. At present, the target price subsidy implemented in our country only includes the price difference subsidy, but this does not mean that the target price subsidy is only in the form of price difference subsidy. The early target price subsidies for agricultural products in the United States included supporting price subsidies and price difference subsidies, and later introduced fixed subsidies. The target price subsidy policy in the pilot stage of China's reform is only the primary form of target price subsidy, that is, price difference subsidy. In the future, China's agricultural product target price subsidy policy should develop to a higher stage, rather than just sticking to a single form of price difference subsidy.

Myth 3: the target price subsidy must be linked to the current planting area and output.

The purpose of implementing the target price subsidy policy is to explore the decoupling between the price formation mechanism of agricultural products and government subsidies, and to actively adapt to the market-oriented reform of agricultural products, rather than simply to stimulate grain production. The international trade of agricultural products and the market-oriented reform of agricultural products require governments to minimize their intervention in market prices. It is an inevitable trend for agricultural price subsidies to change from pegging to decoupling. Once the target price subsidy is linked to the current planting area and output, it will directly affect agricultural production and distort the market price of agricultural products, which has been proved by theory and practice. From the international experience, since its birth, the target price subsidy policy has also undergone a change from the current planting area and output linked to decoupling. When the US government calculated the target subsidy for agricultural products from 1973 to 1984, it was linked to the planting area and output of the current period, but after the promulgation of the Agriculture Act of 1985, it was calculated on the basis of historical planting area and output. As a responsible market economy country, China actively participates in the international trade of global agricultural products, so it is no longer appropriate to adopt the form of subsidy linked to the current planting area and output, but should actively change to the form of decoupling from the current planting area and output. It is suggested that the average data of farmers' planting area and yield in the past 5 years should be used as the basis for calculating the target price subsidy. Because this basically includes "Feng, apology, ping" and other years, but also can effectively solve the current reform pilot problems such as difficult to verify the subsidy area, high administrative operation costs and so on.

Myth 4: the target price subsidy policy is greatly restricted by the total amount of yellow box subsidies, so it cannot be continued to be implemented.

The target price subsidy policy belongs to the "yellow box" policy of WTO agricultural support. When China joined the WTO, the total amount of domestic comprehensive support promised was 0, and only 8.5% of the allowable space was enjoyed. At present, many people fail to really understand the meaning of "8.5%" and mistakenly think that the total amount of all agricultural subsidies in our country should not exceed 8.5% of the total agricultural output value. In fact, according to the legal document on China's accession to the World Trade Organization, "8.5%" includes two meanings: first, the yellow box subsidy for specific agricultural products shall not exceed 8.5% of the output value of that agricultural product. China's specific agricultural products refer to cotton, soybean, corn, wheat, rice, rapeseed, pigs and other seven varieties. Second, the amount of yellow box subsidies for all non-specific agricultural products shall not exceed 8.5% of the total agricultural output value. The so-called non-specific is not specifically subsidized for a certain type of agricultural products. Therefore, although the total amount of yellow box subsidies has great constraints on the implementation of target price subsidy policy, China can still continue to implement target price subsidies for specific agricultural products such as soybeans. First, you can make good use of 8.5% of the subsidies for specific agricultural products. For example, the specific subsidy for soybeans is 8.5% of the total output value of soybeans. At present, there are only two specific subsidies for soybeans: improved seed subsidies and target price subsidies. We can use all the specific subsidies except those for improved varieties to spend on target price subsidies. Secondly, the distribution of non-specific agricultural subsidies for all agricultural products can be reasonably optimized. This means that while certain specific agricultural products enjoy subsidies for specific agricultural products, they can also enjoy subsidies for non-specific agricultural products that are not specifically targeted for it. In fact, the amount of subsidies they have can be greater than 8.5%. Finally, because the target price subsidy policy of a certain agricultural product is generally implemented only in its main producing areas, and the total subsidy constraint is calculated on the basis of the output value of the agricultural product in the whole country, therefore, the actual target price subsidy level in the main producing areas can be appropriately improved.

Misunderstanding 5: the implementation of corn target price subsidy policy is risky, so it is not suitable to implement it as soon as possible.

As the food crop with the widest planting area and the largest yield in China, the policy trend of maize has attracted much attention. In 2014, China launched a pilot subsidy policy for soybeans and cotton. In 2015, the country lowered the temporary storage price of corn for the first time, and the corn price policy transitioned to a more market-oriented target price subsidy policy, which is the inevitable trend of the reform. However, at present, many people think that the implementation of corn target price subsidy policy in China is risky, so it is not suitable to implement it as soon as possible. Its main concern is that after the implementation of the target price policy, corn prices and corn production decline rapidly, endangering national food security. The logical relationship between target price and market price, corn yield and food security is open to question. From a theoretical point of view, after the implementation of the target price subsidy policy, corn price is regulated by market supply and demand. Due to the high corn yield and high storage cost, which is conducive to following the market, coupled with the reality of high domestic corn inventory pressure, the decline of corn prices will be an inevitable trend. The decline in corn prices will affect corn production, but at the same time, we should also understand: first, the decline in corn prices is conducive to narrowing the domestic price gap and reducing the impact of foreign grain imports; second, the current corn inventory is huge in our country. the decline in corn production is conducive to digesting inventory and reducing financial costs; third, under the guidance of the target price, the decline in corn production is limited. Because after the implementation of the target price subsidy policy, the price factor affecting corn yield is no longer just the traditional market price, but also the supply-induced price of weighted synthesis, such as market price, target price and even supporting price. The country can regulate the corn yield by adjusting the target price. According to the current grim situation of high corn yield, high inventory, great import impact of substitutes and lower income of farmers, China should implement the corn target price subsidy policy as soon as possible. Specific to the implementation of the corn target price subsidy policy, it is suggested to consider the following aspects: first, while implementing the target price subsidy policy, the corn support price should be retained, but the support price level should be appropriately reduced; second, the target price subsidy is decoupled from the current acreage and output, and only linked to the current market price; the third is to introduce fixed subsidies for corn.