MySheen

Will the grain industry repeat the "soybean storm"?

Published: 2024-11-05 Author: mysheen
Last Updated: 2024/11/05, If you control oil, you control all countries; if you control food, you control everyone. As former US Secretary of State Henry Kissinger said, the issue of food security is not only a major issue of concern above the temple, but also related to the eating of rural villagers.

"if you control oil, you control all countries; if you control food, you control everyone." As former US Secretary of State Henry Kissinger said, the issue of food security is not only a major issue of concern above the temple, but also a necessary topic related to whether the villagers in the countryside can have enough to eat and drink.

At a time when drought is raging, and autumn grain, especially corn, in some areas has been devastated by drought, creating hidden worries about food, a piece of data from China's General Administration of Customs more directly reflects the fact that "foreign grain" is accelerating its influx into the domestic market. with the strengthening of the price linkage at home and abroad, the worry about whether the "soybean" storm will be repeated in the grain industry makes people in the grain industry feel that the grain "foresight" seems to be gradually becoming a "near worry".

The internal and external price difference widens and the influx of "foreign" grain is accelerated.

China imported 11.34 million tons of grain and cereal flour in the first seven months of this year, up 80.7 per cent from the same period last year, according to the General Administration of Customs.

Since the beginning of this year, China's grain imports, especially wheat imports, have significantly speeded up. Although China's grain imports have increased for 11 consecutive years, and "foreign grain" imports account for less than 5% of domestic output, the import growth rate of "foreign grain" has rebounded sharply. And since 2008, China has changed from a big net grain exporter to a net grain importer, which has attracted people's attention to the issue of food security.

With regard to the reasons for the relatively rapid growth in imports of agricultural products since the beginning of this year, an analysis article released on the official website of the General Administration of Customs of China pointed out: first, domestic demand is strong. Take soybeans as an example, at present, domestic imported soybeans are mainly used for oil extraction, and the main products of soybean processing are soybean oil and soybean meal. At present, the proportion of domestic large-scale farming has increased, the demand for feed such as soybean meal continues to increase, and enterprises export soybean meal with higher economic benefits. Second, the price of agricultural products in the international market is at a low level. According to the grain price index released by the United Nations Food and Agriculture Organization, the average index in May was 204.4 points, down 13 per cent from a year earlier and 1.2 per cent from a month earlier. The grain price index fell 15.9% from January to May compared with the same period last year.

"at present, China is fully capable of achieving self-sufficiency in staple grain. If we add in the huge amount of storage, the overall supply can be described as loose, and the sharp increase in China's staple grain imports is not due to the structural imbalance between domestic supply and demand." Fan Jianya, an analyst at Cofco Futures, pointed out that for different varieties, there are different reasons for the increase in imports.

For wheat, due to the traditional farming methods of small-scale farmers in China, the sowing of wheat is relatively scattered, and the quality of wheat is not as good as that of imported wheat. Imported wheat mainly plays a role in improving the quality of flour by adding an appropriate amount in flour making. For corn, most of the imported corn is used as feed. Between late 2013 and early 2014, Chinese customs returned large quantities of US corn and its downstream products, DDGS, containing genetically modified ingredients, coupled with relatively high corn prices-which has led to an increase in the number of imported sorghum in recent years. Sorghum is relatively cheap and is also a good energy feed. As for rice, as domestic rice prices are supported by policies, the difference between internal and external prices is very obvious, and border smuggling trade is active. Most of the imported rice is low-priced ordinary white rice and broken rice, mainly to meet the needs of industry rather than food rations.

"the rapid growth of grain imports is also due to the gradual widening of the price gap at home and abroad. At present, the international FOB price of wheat, plus freight insurance, customs duties, import value-added tax, handling charges, and other fees, is about 10% cheaper than the market price of domestic wheat when it arrives. " Han Yijun, a professor at China Agricultural University, pointed out that since China joined the WTO, with the acceleration of industrialization, the cost of grain production is in a period of rigid and rapid growth, coupled with the relevant policies of collecting, storing and supporting the market, so that domestic grain prices remain high, and the price gap with international prices gradually widens, accelerating the trend of domestic imports.

The surge in imports is not equal to the domestic "food shortage"

"from a series of data analysis, the net import of staple grain in China is actually very limited, and this phenomenon does not mean that there is a 'grain shortage' in our country," Fan Yuanya pointed out.

According to the documents of the National Development and Reform Commission, China's grain import quota for 2014 is as follows: 9.636 million tons of wheat, 90 percent of state trade; 7.2 million tons of corn, 60 percent of state trade; and 5.32 million tons of rice, 50 percent of state trade. According to the data in the balance sheet of supply and demand of the National Grain Center in July, China's grain output in 2014 is as follows: 123 million tons of wheat, 223 million tons of corn and 207 million tons of rice. Looking at the import volume in recent years, even though the import volume has increased, it still fails to reach the total quota. Even the total quota accounts for less than 8% of the output of various staple grains. Therefore, imported grain is not enough to change the overall balance of supply and demand in China's grain market.

However, although the quantity is limited, the impact of imported grain on China's food policy should not be underestimated. Fan Xianya believes that China's agricultural working population has a large population base, a low degree of development, and congenital deficiencies, so it cannot be compared with the farm economy of developed countries. However, if development is not sought, it is not always a long-term solution to be sheltered purely from a policy perspective. Especially since the beginning of this year, with the wheat collection and storage reaching a record level, the problem of insufficient treasury capacity has further emerged. The high quality and low price of imported grain will force the reform of China's agricultural protection policy to a certain extent.

There is a sharp increase in price risk due to internal and external interaction.

"the continuous increase in the number of imports has further strengthened the linkage of grain prices at home and abroad." Chai Ning, the China Grain Network, believes that the challenges posed by skyrocketing international grain prices to domestic prices and food security can not be ignored.

The people concerned said that for China, there should be no immediate worries but far-sighted concerns. The bumper harvest of grain in successive years has provided a solid foundation for ensuring food security. However, based on domestic security, food supply can not be relaxed for a moment. The food crisis that occurred only once in the past decade, as the global extreme weather becomes more and more frequent, the normalization trend is becoming more and more obvious.

"in the last four years, the global food crisis or high food prices have broken out three times, in 2008, 2011 and 2012. There have been three food crises or high food prices in the world in the past four years. China should attach great importance to this and must adhere to its basic policy, that is, to ensure China's food security based on domestic production. " Han Yijun stressed that the practice of the past four years has repeatedly proved and warned us that for China, which has a population of 1.34 billion, we must not put our rice bowls in the hands of others.

In order to solve this problem, Han Yijun suggested that the existing support policies such as subsidies and temporary collection and storage in support of agriculture should be gradually adjusted to the direction of the target price subsidy policy, but the adjustment should not be too fast.

Fan Jianya pointed out that the issue of food security is of high importance and involves a wide range of areas, and it is necessary to carefully weigh the policy reform and take into account the interests of all parties. Since 2014, the policy on cotton has changed from collection and storage to pilot direct subsidy, which can be described as a new idea of policy reform. However, after all, cotton is a cash crop, and the effect of its policy change remains to be seen and whether it can be applied to the staple grain market remains to be considered. In addition to policy change, it is also a feasible way to learn from the experience of the United States to promote agricultural modernization and improve the agricultural insurance system.

 
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