Where does the strange phenomenon of "simultaneous increase of three quantities" of grain come from: price upside-down competition

In the past two years, there has been a strange phenomenon in China's grain field: the annual grain output is stable at more than 600 million tons and increasing year by year, but the import volume is growing rapidly, and the grain stock is also increasing, especially the serious backlog of corn and other varieties. This "simultaneous increase in grain production, imports, and stocks" is a rare new situation in the past. So, what is the reason for the "simultaneous increase of the three quantities"? And how to solve this situation?

Chen Xiwen, director of the Office of the Central Rural work leading Group, said at the 2015 China Rural Development High-level Forum held a few days ago that China's grain is showing a strange phenomenon of "simultaneous increase in production, imports, and stocks" and is becoming more and more serious. if it is allowed to develop, it will have a negative impact on the healthy development of China's agriculture and the growth of farmers' income.

Strange phenomenon: overstocking while importing

Why is "simultaneous increase of three quantities" a strange phenomenon? In a certain period of time, the national food situation mainly depends on grain production capacity, inventory level and import capacity. Generally speaking, when the demand is basically constant, since a country's grain production is growing, imports should not remain high; if imports continue to grow, it is impossible to have a backlog of inventories. after all, there is no need to increase imports under high inventories.

The truth is just not unusual. In the past two years, China's annual grain output has remained stable at more than 600 million tons and has increased year by year, but the import volume has increased rapidly, with grain imports exceeding 100 million tons for the first time last year. At the same time, the grain inventory is growing, especially the serious backlog of corn and other varieties, the inventory pressure is prominent, the warehouse capacity is tight, but the import volume continues to increase, resulting in a new problem of "import while backlog".

Chen Xiwen believes that the structural asymmetry between production and consumption, that is, the structural contradiction between supply and demand of agricultural products, is an important factor in the surge in imports. Last year, grain imports exceeded 100 million tons, but more than 70 percent of them were soybeans, and the whole year imported 71.4 million tons of soybeans, an increase of 12.7 percent over the same period last year. However, the output of domestic soybean is only more than 12 million tons, which shows that China's soybean production can not meet the domestic demand.

The phenomenon of "simultaneous increase of three quantities" is a new situation in recent years. It is inevitable that some domestic varieties need to be imported. In addition to soybeans, some high-end high-quality rice, high-quality strong and weak gluten wheat, and feed corn meet the domestic diversified needs. To a large extent, it has the nature of surplus and deficiency adjustment. The main reason is that the competition in the international agricultural product market is becoming more and more fierce, and the competitiveness of China's agriculture is not strong.

Chen Xiwen said: the difference between domestic and foreign prices of staple agricultural products shows that the competitiveness of China's staple agricultural products has obviously weakened. Data show that in June this year, the customs value of imported rice from Thailand was 1.37 yuan per jin, and the wholesale price of late indica rice in China was 51.8% higher. The wholesale price of domestic high-quality wheat is 1.55 yuan per jin, 56.6% higher than the international market, while the price of domestic corn is 1.24 yuan per jin, 65.3% higher than that of imported corn. Under such a price difference, grain processing and trading enterprises are profitable to import grain, and the natural power is high.

Accompanied by "import, while backlog" is the "foreign goods into the market, domestic goods into the warehouse" problem, which is particularly obvious on corn. According to the United Nations Food and Agriculture Organization, the price of corn exports from the United States, which reached $324 per ton in November 2012, fell to $164 in September 2014, a drop of nearly 50%. However, the price of corn in China is relatively stable under the policy of supporting the market. In order to protect the interests of farmers, the corn harvested by domestic farmers was received by the state-owned grain depot at a temporary storage price higher than the market price, for which the state paid a huge price difference and storage costs, while imported low-cost corn became raw materials to enter the field of circulation and processing.

The high inventory is directly related to the purchase policy of supporting the grain market in China since 2004, and also related to the high grain reserve rate of our country for a long time. In the world, the reserve rate of 17% to 18% is regarded as the safety warning line of grain inventory-consumption ratio. Compared with this, China is now in excess reserve. Ma Xiaohe, vice president of the Macroeconomic Research Institute of the National Development and Reform Commission, believes that it is not the more grain in reserve, the better, and it is necessary to reduce the reserve to a reasonable range. In view of the slow reform of China's grain circulation system and the large population of the National University of China, the food security reserve rate can be higher, but it is best not to exceed 30% of the social consumption in that year.

New problem: low competitiveness of price upside down

So, why is the price of agricultural products in China higher than that of similar products abroad? Ke Bingsheng, president of China Agricultural University, believes that the high price of labor is an important reason why domestic agricultural products are not competitive. The price of agricultural products in the international market can rise and fall because of its high degree of mechanization and relatively small labor costs. He said, for example, "the cost of harvesting sugarcane in Guangxi already accounts for 1/3 of the price of sugar, and the cost of picking cotton in Xinjiang alone accounts for about 40% of the price of cotton. The above are all the advantageous producing areas of this agricultural product, and there is the problem that the labor cost is too high. Data show that the real wage of China's labor force has increased at an average annual rate of about 8% in recent years.

"before 2005, Chinese agriculture was very competitive because in addition to low labor costs, the rental cost of cultivated land was also relatively low." From 2008 to 2013, farmland rents in the northeast and north China increased by 51 per cent and 70 per cent respectively, said Huang Ji, director of the Agricultural Policy Research Center of the Chinese Academy of Sciences. The change of materialization cost is global, but the change of labor and land cost is within the country, which will significantly affect the competitiveness of a country's agricultural products in the international market.

The low productivity of agricultural labor is another reason for the price upside down. At present, the per unit yield of major crops in China is close to or even exceeds the advanced level of the world, while the agricultural labor productivity is far lower than the advanced level of the world, showing that "one leg is long and the other is short". According to a report by the China Modernization Research Center of the Chinese Academy of Sciences, the per unit yield of rice and wheat in China has reached the level of developed countries, and the per unit yield of corn has reached the level of moderately developed countries, but China's agricultural labor productivity is only 47% of the world average. In recent years, it is precisely in cotton and other varieties with low labor productivity that China's imports have greatly increased.

Over the years, although the state has taken a lot of measures, agriculture has not been out of the plight of rising costs and declining benefits. At present, the average import tariff level of China's agricultural products is only 15.2%, which is 1/4 of the world average level, and is one of the countries with the highest degree of agricultural openness. With the promotion of the construction of free trade zones between China and New Zealand and Australia, the degree of agricultural openness will be improved. In the future, China will face competition not only from developed countries with rich agricultural resources and high level of agricultural modernization, but also from developing countries with obvious labor advantages.

China implements quota management on imported grain, with 9.636 million tons of wheat, 7.2 million tons of corn and 5.32 million tons of rice. The import tariff is only 1% within the quota and 65% for the extra. At present, the import of grain is still within the tariff quota, but China is completely open to the import after levying non-quota tariff. If the price of agricultural products at home and abroad is still upside down after breaking through the tariff quota and levying a high tariff of 65%, it will bring consequences such as the reduction of farmers' enthusiasm for growing grain and the decline of the agricultural industry. According to expert estimates, according to the current production costs and price trends, in another five to seven years, the import of the three major grains at non-quota tariff rates will become a reality.

Looking for countermeasures: expanding scale and improving quality

"without strong support from the government, the resource elements of agriculture will be lost." Chen Xiaohua, vice minister of agriculture, said, "in the past, the goal of supporting the protection of agriculture was to increase production, but now we should take the transformation mode as the goal, and the corresponding support policies should focus on how to improve the comprehensive production capacity of agriculture and how to achieve sustainable development. Pay more attention to quality and efficiency." Agriculture is a strategic industry of our country, no matter how tight the financial resources are, we must ensure that the input in agriculture is increased or not, and we should improve the support mode of agriculture, improve its accuracy, orientation, and guidance, and comprehensively use fiscal, financial, and industrial policies to support China's agriculture to cope with international competition.

Experts believe that the urgent task is to comprehensively use quota management, trade relief, control of the use of imported products, inspection and quarantine, and "green box" subsidies to prevent the negative impact of price inversion from further expanding, and to maintain the three bottom lines of farmers' income, the production capacity of food rations, and the supply of important agricultural products. In the long run, the fundamental way to ensure national food security is the improvement of potential production capacity. It is necessary to develop appropriate scale operation and grain industrialization on the basis of adhering to the red line of cultivated land, promoting the construction of high-standard farmland, and speeding up scientific and technological innovation, as emphasized in the past. In the future, the focus of interest regulation should be tilted to the main body of new agricultural management and the main grain producing areas.

At present, China should cultivate a new type of main body, improve the service system, and speed up the development of appropriate scale operation. Many problems in agriculture are related to the small and scattered operation scale, which requires the cultivation of new business entities and the development of agriculture with the concept of modern industry. There are more than 240 million small farmers throughout the country, and the situation varies from place to place, and the basis for development is different. To promote innovation in the mode of agricultural management, measures must be taken in accordance with local conditions. Experts suggest that we should actively guide land circulation, guide and support the development and growth of large farmers, family farms, farmers' cooperatives, and leading enterprises, and improve the socialized service system of agriculture. in order to expand the scale of services to make up for the lack of land management scale.

Most of the major grain-producing counties are small financial counties, and the state should increase support. At present, the relevant departments are studying and improving the interest compensation mechanism for major grain-producing counties, with the goal of ensuring that major grain-producing areas do not suffer losses and give motivation to places that attach importance to agriculture and catch grain. In the future, it is necessary to increase financial rewards and subsidies to major grain producing provinces and counties, reduce the financial burden of major producing areas, compensate for commercial grain transferred from major producing areas, strengthen the construction of agricultural infrastructure in major producing areas, and establish a mechanism for linking interests between major producing areas and major selling areas.