The price reform of agricultural products may be on the brink of high inventory, such as a "sharp sword".

The government is worried about the large amount of cotton and sugar stacked in the warehouse, collecting high prices from farmers, but now the prices have fallen and cannot be sold at a loss, and if all the stocks are sold on the market, agricultural prices are obviously in danger of collapse. According to a reporter from the China Securities News, although the State Reserve aims to protect the interests of farmers, it ends up with "two wrongs": first, prices are rigid and the market for agricultural products is distorted; second, high inventories bring tight storage capacity and financial difficulties.

This year's Central Committee document No. 1 proposed to sum up the pilot experience in reforming the target price of soybeans in Xinjiang, Northeast China and Inner Mongolia, improve subsidy methods, reduce operating costs, and reasonably determine the reserve scale of important agricultural products such as grain, cotton, sugar, meat, and so on. A number of agricultural experts told our reporter that the current situation of the agricultural product market and high inventory is forcing its price reform, including vigorously developing the agricultural product futures market, but the road to marketization must be carried out in a planned and step-by-step manner, and should not be taken in undue haste.

High inventory is as high as a "sword"

The government has clearly noticed the headaches caused by high stocks of agricultural products.

At a news conference held by the Information Office of the State Council on 3 February, Chen Xiwen, deputy head of the Central Rural work leading Group and director of the office, revealed that since the spring sowing last year, various localities have reflected to the central government that some places have indicated that the existing (some agricultural products) stocks are full, and if there are new acquisitions to install them this year, this is a relatively big problem.

The most prominent problem is that if domestic acquisitions are to be sold, the prices are higher than those in the international market, and marketing and processing enterprises may be more willing to use foreign imports, resulting in rising domestic inventories.

To encourage farmers to grow strategic crops, the Chinese government has been buying cotton, corn, wheat, soybeans, sugar and rice at above-market prices. But this has led to China's full warehouses, rampant smuggling and growing cheap imports of agricultural products overseas. At present, China already accounts for 60% of the world's cotton hoarding, and the state reserve of white sugar is as high as 6 million tons.

In this regard, Liu Yonghua, a researcher at Wanda Futures, told our reporter that the purchase and storage prices in previous years were basically determined on the basis of sugar factory costs plus reasonable profits, but in the market environment of excess supply, the collection and storage prices were generally significantly higher than the market prices, attracting domestic sugar producers, trading enterprises, terminal sugar enterprises and even imported processing sugar enterprises to actively hand over and store them.

"from the point of view of the normal reserve function, it is more appropriate to maintain a consumption of three months, that is, a reserve scale of three to four million tons. at present, state and local reserves are expected to reach the level of six to seven million tons, resulting in drawbacks such as tight storage capacity and heavy financial burden. it is indeed necessary to reduce the size of reserves." Liu Yonghua said.

To some extent, the State Reserve has distorted the agricultural market. People in the industry pointed out that there is a huge price gap between domestic and foreign agricultural products, such as cotton, sugar, and oil, which was once as high as several thousand yuan, hindering the free circulation of the grain and oil market, and most of the grain and oil markets have obvious characteristics of "policy cities." distorting the market price formation mechanism is not conducive to the rational allocation of market resources.

As far as white sugar is concerned, the state reserve policy has led to huge differences between domestic and foreign sugar markets, especially the huge gap in sugar production costs, resulting in domestic sugar prices about twice as high as international sugar prices. This is also a common dilemma faced by almost all domestic agricultural products.

Zhu Lei, a futures researcher at Zhejiang Merchants, said that the previous collection and storage policy really solved the problem of farmers' difficulty in selling grain, but caused the price of beans market to be rigid and seriously distorted the price of the domestic grain market. And the policy also failed to effectively stabilize the soybean acreage in the main producing areas. In fact, at present, the acreage of domestic soybeans, cotton and rapeseed in China continues to decline.

The State Reserve inventory is like a "sword", hanging over the agricultural product market. In particular, under the background of a bear market, the prices of agricultural products such as soybeans and cotton are facing the pressure of high inventory, which suppresses their upward momentum. Some analysts say that if the country dumps stocks of related agricultural products, it could lead to a rapid rise in supply, causing prices to fall again.

The State Reserve has also been "glowing and hot".

Reviewing the history, we can not deny the important role of the state collection and storage in a specific period.

Since October 2008, three provinces and one region in Northeast China began to implement the policy of temporary collection and storage of domestic soybeans. Since the implementation of the soybean temporary storage policy from October 2008 to April 2014, it has had a far-reaching impact on the international and domestic soybean market and market prices. Wang Xiaoyu, deputy secretary general of Heilongjiang Soybean Association, believes that the soybean storage policy is historic and of far-reaching historical significance, and it is the first battle for pricing and discourse power in China's soybean market.

China's grain market has lasted for more than 60 years from unified purchase and marketing to double-track purchase and marketing and then to the current target price reform of soybeans. Unified purchase and marketing lasted for 39 years from 1953 to the end of 1992, during which there were double-track, affordable and negotiated grain. In 1996, China's soybean market was liberalized, and the import of genetically modified soybeans increased year by year, from 1.11 million tons in 1996 to 37.44 million tons in 2008. In 12 years, the degree of external dependence of Chinese soybeans reached 78.7%.

During this period, soybean prices skyrocketed and plummeted: when new beans were listed, prices fell so that farmers had no profit from selling beans; when soybean farmers sold beans, soybean prices began to rise again during spring sowing. Due to the lack of pricing power and discourse power in China's grain market, the soybean industry was hard hit. Therefore, the state implemented the temporary soybean collection and storage policy, which effectively played a role in protecting the planting income of soybean farmers at the initial stage of implementation, and then the sown area of soybean in our province was in the highest area in 2009 and 2010.