How do grain enterprises share dividends when international grain prices fall?

According to a new report released by the World Bank, food prices on the international market fell 14 per cent between August 2014 and May 2015, to a five-year low. The report, called Food Price Watch, said that due to low oil prices, there was an adequate global food supply in 2014 and a bumper harvest of wheat, corn and rice in 2015, which led to a sharp fall in international food prices.

Data show that between August 2014 and May 2015, the price of wheat on the international market fell by 18 per cent, rice by 14 per cent and corn by 6 per cent. "the sharp drop in international grain prices is a positive factor for domestic grain merchants to reduce costs." Li Guoxiang, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences.

Li Guoxiang pointed out that at present, enterprises should make good use of both foreign and domestic markets to maximize their profits. Some large enterprises with capital and strength can position their vision in the international market and make more use of foreign markets to achieve enterprise development.

In fact, some large domestic enterprises have begun to open up foreign markets. At present, Cofco's assets and institutions cover more than 60 countries and regions, and its business covers more than 140 countries and regions. Ning Gaoning, chairman of Cofco, told China Youth Daily that Cofco is speeding up its international strategic layout to build a whole industry chain from field to table in the global market.

How to form the upside-down pattern of grain prices at home and abroad

"the decline in international food prices can reduce the purchase cost of enterprises, and enterprises need to make good use of the two markets." Li Guoxiang told reporters.

At present, the purchase price support of the domestic grain price entrusted market has remained high for a long time, making the domestic grain price in the "highland". At present, the customs value of domestic corn, rice and wheat per ton in Guangdong Port is about 750,900 and 500 yuan higher than that of the same varieties, respectively, and the price difference of corn even exceeded 1000 yuan at one time.

Agricultural analyst Ma Wenfeng told reporters that globally, the average price of corn in Europe, the United States, Japan and China, the main regions of corn production and consumption in the world, was 260 US dollars / ton in 2014, down 14.04% from the previous year, and declined significantly for two consecutive years. The United States, France and Japan all fell by more than 15%, falling by 19.88%, 18.16% and 16.39%, respectively. China's corn reached US $398 per ton, up 3.51% from the previous year, making it the only major country in the world where prices have risen. China's world corn price ratio is 1.53 of the international average price, and the price gap is at an all-time high.

"because of trade restrictions and policy protection, foreign prices were suddenly opened up." Lu Feng, a professor at the National Institute of Development at Peking University, told reporters.

Lu Feng believes that on the one hand, international food prices are in line with the market, and the downward pressure on the economy is global. In addition, commodity prices are relatively low, and the downward trend increases. On the other hand, from the perspective of food security, the minimum purchase price of grain and the price of agricultural products with quota restrictions are quite different from those abroad.

"in terms of efficiency, China's full opening up in the future, and its global status, how much benefit will it bring to assess the gap in domestic and foreign food prices caused by the protection policy? What are the opportunity costs? These issues need to be discussed and reflected on. " Lu Feng told reporters.

As the domestic grain price is higher than that of imported grain in the same period, some analysts put forward the question of whether the market purchase policy should be continued or not.

Li Guoxiang believes that the positive significance of market-supporting acquisitions is to stabilize prices and protect the interests of producers, but the impact of the international market has exposed the serious deficiency of policy anti-risk ability. He suggested that policies should not be designed in accordance with closed environmental conditions, and that future policies must be adjusted taking into account international market factors.

At present, some provinces have begun to reform the target prices of cotton and soybeans, and the prices are closer to the market. Li Guoxiang said: the target price reform allows local governments to be closer to the local reality and not to adopt an across-the-board approach. Local governments formulate corresponding support policies in the light of the characteristics of local agriculture, which is the future direction of target prices.

"it varies from place to place, some are target prices, some are upgraded versions of target prices, or targeted target prices, or financial support, and local agricultural development goals should be combined with local policies and measures." Li Guoxiang said.

Demand decides to make good use of the two markets.

In terms of demand, the domestic market also needs to import some grain from abroad.

"in 2014, China's imports of grains, soybeans, oilseeds, vegetable oil, sugar, meat and dairy products reached nearly 130 million tons, affected by the upgrading of consumption structure, resources and environmental constraints. It is conservatively estimated that the import of these agricultural products will exceed 200 million tons in the next 10 years, accounting for 20% of the total domestic consumption." Ning Gaoning said.

On the other hand, under the protection of grain purchase price, domestic grain price is higher than foreign grain price. And grain processing trade enterprises want to expand the scale and achieve profits, so more and more enterprises begin to turn their attention to overseas.

Food is related to national security and market stability. Ning Gaoning said: the country's new food security strategy proposes to rely on ourselves to protect food rations, concentrate domestic resources to maintain key points, and achieve "basic self-sufficiency of grain and absolute safety of food rations." This requires "moderate import" under the premise of "giving priority to us, having a foothold at home, and ensuring production capacity" in order to effectively ensure national food security. The biggest change of the new food security strategy from "import restriction" to "moderate import", its essence is how to make good use of two markets and two kinds of resources to meet the needs of domestic consumption.

In fact, as the main channel of China's grain import and export trade and the largest main body of market-oriented operation of grain and oil circulation, Cofco undertakes the corporate responsibility of making use of global resources and trade advantages, adjusting the surplus and shortage, and ensuring the domestic grain supply to meet the needs of the domestic market.