A reasonable way to establish the Target Price system of Agricultural products

This year's document No. 1 of the CPC Central Committee proposes to gradually establish a target price system for agricultural products, which is of great significance. To establish the target price system of agricultural products, it is necessary to reform the minimum purchase price system of grain and the temporary purchase and storage system of important agricultural products, but it does not mean that the minimum purchase price system of grain and the temporary purchase and storage system of important agricultural products should be completely abolished in the future. It is necessary to enhance understanding, correctly handle the relationship between the implementation of the target price system for agricultural products and the implementation of the minimum purchase price system for grain and the temporary purchase and storage system for important agricultural products, and reasonably introduce the target price system for agricultural products.

The target price system of agricultural products can not completely replace the minimum purchase price system of grain.

At present, China implements the minimum purchase price system for rice and wheat, which has the dual functions of "regulating price" and "bottom purchase and sale" in practice. As a reform plan, if the target price system of agricultural products is established, it can replace the function of "regulating price" contained in it, make the market mechanism play a better role, and change the policy subsidy from implicit and difficult to control to explicit and controllable, so as to improve the rationality and effectiveness of the use of government subsidy funds, but it can not replace the function of "bottom purchase and sale".

The minimum purchase price system of grain has a strong function of "regulating price", which is mainly to adjust the price level, control the price fluctuation range, and ensure farmers to obtain basic operating income. When purchasing grain, the China Grain Storage Company mainly buys according to the lowest grain purchase price, while processing enterprises and other social purchasing and marketing enterprises will determine their respective purchase prices according to the lowest grain purchase price in that year, and will post the purchase before the implementation of the grain purchase price implementation plan, and will post the following purchase after the implementation of the grain purchase price implementation plan. For processing enterprises and other social purchasing and marketing enterprises, grain purchase takes up a lot of money, and the risk of purchase and sale is relatively large. Unless grain production is reduced or demand exceeds supply, the grain purchase price can be reduced as much as possible. Even in the year when the grain minimum purchase price plan has not been officially launched, the minimum purchase price objectively plays a role in "regulating the price" and is the basis of market pricing. The continuous increase of the minimum purchase price is good for protecting the interests of farmers.

The minimum grain purchase price system also has a strong function of "bottom purchase and marketing", mainly to provide channels for guaranteed collection, to ensure that the grain produced by farmers in the main producing areas can be sold in a timely and smooth manner, and to adjust the surplus and shortages across regions and years across the country. to achieve post-natal logistics turnover of grain. China's rural areas have a large population and little land, and the main grain producing areas are mainly located in economically underdeveloped areas. on the whole, the warehousing and logistics conditions are relatively poor, and grain processing enterprises are underdeveloped, while grain production is affected by many factors such as weather and market. during the bumper harvest of grain production, it is easy to appear that local enterprises are unwilling to buy or even compete to depress the grade and price, thus making it difficult to sell grain. For farmers, the most important thing is to be able to sell grain smoothly and obtain income in time after grain production. After the implementation of the minimum grain purchase price system, through the intervention of the China Grain Storage Company, fixed-point purchase is mainly carried out according to the limited minimum purchase price in the grain purchase season, and then warehousing adjustment and market auctions are carried out across regions and years across the country. It helps farmers solve the problems of insufficient warehousing and logistics facilities of local enterprises after a bumper grain harvest, local processing enterprises and other social purchasing and marketing enterprises are unwilling to buy or even compete to depress levels and prices, which is not only the substantial and reliable protection of the interests of farmers in the main producing areas, but also enables the country to master low-cost food sources for cross-regional and cross-year transfers throughout the country. It is the material basis and important means for the government to prevent inflation, protect people's livelihood and enhance the competitiveness of the international economy.

The hidden defect of the minimum grain purchase price system is that it is difficult to set a reasonable minimum purchase price, it is easy to rise and difficult to fall, and it is necessary to organize and sell it in the market in time after purchasing at the lowest purchase price. under the condition that the policy is not carefully designed and the domestic price continues to be much higher than the international price, it is possible to distort the market, bring huge financial risks, as well as rent-seeking and corruption. However, this system is relatively simple in operation, which can be completed mainly through the enterprise operation of the China Grain Storage Company, with high efficiency, reliable management and control, and strong protection of farmers' basic operating income. In contrast, the main function of the target price system for agricultural products is to provide policy subsidies or market loss subsidies, which are dominant and controllable in nature, which can reduce market distortions and give better play to the role of the market in the allocation of resources. however, as China's agriculture is dominated by small-scale production, the work handled by the government will be more complex, requiring the establishment of a special management system. If specific producers and consumers are required to register and be examined in accordance with unified regulations, the corresponding transaction costs and financial expenditure will be greatly increased.

The target price system of agricultural products can not completely replace the temporary collection and storage system of important agricultural products.

At present, China implements a temporary storage system for important agricultural products such as corn, soybeans, rapeseed, cotton, sugar and so on. Similar to the minimum purchase price system of grain, this system also has the dual functions of "regulating the price" and "supporting the purchase and sale" of agricultural products produced by farmers. As a reform plan, if the target price system of agricultural products is established, it can replace the function of "regulating price", but it can not replace the function of "bottom purchase and sale".

The main defect of the temporary collection and storage system of important agricultural products is that it is difficult to set reasonable prices for temporary collection and storage, it is easy to rise and difficult to fall, and it is necessary to organize and sell them in the market in time after temporary collection and storage, and if there are reasonable losses to be borne by the public finance. If the temporary collection and storage price is determined irrationally, it may distort the operation of the market, disrupt the reasonable price ratio and price difference between different agricultural products, and may also bring huge financial risks. But in the policy operation is relatively simple, mainly by the central vertical management of state-owned circulation and reserve enterprises and some processing enterprises and other organizations, the efficiency is relatively high, the protection of farmers' basic operating income is more effective. In contrast, the main function of the target price system of agricultural products is to provide policy subsidies, which can give better play to the decisive role of the market in the allocation of resources under the reasonable design of the system, but the subsidy work of the government is very complicated. with important conditions, fiscal expenditure may not decrease but increase.

The main problems faced in the practice of the minimum purchase price system of grain and the temporary acquisition and storage system of important agricultural products

China began to establish the minimum purchase price system of grain in 2004 and the temporary purchase and storage system of important agricultural products in 2008. In 2005-2006, 2009 and 2012, the state launched the implementation plan of the minimum purchase price for indica rice, the japonica rice plan in 2007 and 2012, and the wheat plan in 2006-2009, 2012 and 2013. In 2008, 2012 and 2013, the State launched temporary storage of corn, 2008-2013 temporary storage of soybeans and rapeseed, and 2011-2013 temporary collection of cotton and sugar. After the implementation of these two systems, they have played an important role in increasing farmers' income, promoting production development, ensuring market supply and stabilizing price levels. However, in practice, due to the changes in domestic and foreign markets, the next implementation of these two systems are faced with challenges.

In these two systems, the implicit assumption to ensure the reasonable operation of the system is that the domestic price is lower than or equal to the import cost price in the international market, and the determination of the domestic price itself should be reasonable, otherwise it may be impacted by the international market. A few years ago, due to the sharp fluctuations in the prices of international agricultural products, the prices of agricultural products in China were significantly lower than those in the international market, and the national "price regulation" mainly considered to protect the basic operating income of domestic farmers. The large fluctuations of international agricultural prices and their impact were not estimated and considered enough, and the "minimum" and "temporary" were not achieved in the policy operation. At present, the market price of agricultural products in China is generally higher than the international price, which leads to the rapid growth of the import of agricultural products, and begins to distort the rationality of price changes and the impact of the international market. If a new mechanism to protect farmers' interests is not introduced in time, the next step of production development, market regulation and government expenditure will be caught in a dilemma.