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Speeding up Agricultural Structure Adjustment? De-stockpiling of Grain is the Key

Premier Li Keqiang pointed out in this year's government work report that we should speed up the adjustment of agricultural structure. Continuous increase in grain production has provided a strong guarantee for stabilizing prices and improving people's livelihood, but it also faces problems such as a substantial increase in stocks and a drop in market prices. More measures should be taken to digest grain stocks, vigorously support intensive processing of agricultural products and extend the chain of agricultural industry. Last year, China's grain output has increased by twelve consecutive years, but grain stocks have reached a historical peak, especially corn. Under the idea of "supply-side reform", the adjustment of grain planting structure has entered the strategic planning.

According to the data released by the National Bureau of Statistics, the total grain output of China in 2015 was 62,143.5 million tons, about 124 billion kg, an increase of 2.4% over the same period of last year, which stabilized at more than 1.2 trillion kg for three consecutive years. China's grain output has historically achieved "twelve consecutive increases". At the same time, China's grain imports are also increasing. The latest customs statistics show that the annual grain import volume in 2015 is 1247.7 million tons, about 250 billion kg. According to the proportion of imported grain, one kilogram of every six kilograms of grain in our country comes from abroad.

"Domestic grain production costs are high, foreign grain prices are cheap and more competitive." Han Changfu, Minister of Agriculture, gave an example. Last year, the total import of soybean in grain was the highest, amounting to more than 80 million tons. Although the total import of grain increased, it still accounted for a small proportion of China's total grain. "According to the overall plan for the future, grain needs to be imported moderately but not dependent on imports, and grain does not pursue annual growth, but it must remain stable." He said.
While the grain harvest is good, it is still imported in large quantities. In response, Chen Xiwen, deputy head of the Central Rural Work Leading Group and head of the office, said: "China's grain production has been increasing year after year, but there are still gaps relative to demand, such as soybeans and some rice, wheat and maize that need variety adjustment. This part of demand must be met through imports."
Moreover, the increase in imports is not due to insufficient food. The huge price gap between domestic and foreign grain has also led to this phenomenon. It is understood that since 2004, China has implemented a minimum purchase price and temporary storage policy to improve farmers'enthusiasm for grain cultivation and stabilize grain production. With the gradual increase of purchase price, the price of domestic grain market rises with the rising tide. However, in recent years, the price of grain in the international market has turned downward, and the price inversion of agricultural products at home and abroad has become increasingly evident. Since 2012, the domestic grain price has been gradually higher than the international market.

At present, grain storage has approached the historical peak, and a large amount of grain is deposited in the national treasury, new grain is difficult to store, old grain is difficult to come out. According to World Food and Agriculture Organization (FAO) standards, the ratio of inventory to consumption is 17%-18% in a safe area, that is to say, to achieve a safe state of food. At present, the ratio of grain depot to sales in China is much higher than this level. From the supply side, this excess grain can also be called "demand", but it is not effective demand, but surplus inventory.
Zang Yunpeng, a researcher at China Agricultural University, said in an interview with the people's finance and economics that the structural excess of grain in China is mainly caused by two factors: on the one hand, the high cost of grain in China makes it possible for low-price foreign grain to drive directly into the other hand, and on the other hand, the grain subsidy mode of price complementation in China results in the price of harvest and storage. Increase invisibly, while the United States export grain to developing countries at low prices through export loan guarantees + grain export bundled foreign policy mode of operation, which has a huge price inhibition effect on China's grain sales. In this way, domestic grain loses its price advantage.

2The Central Rural Work Conference held at the end of 015 made important arrangements for the de-stockpiling of agricultural products, speeding up the digestion of excessive stocks of agricultural products and accelerating the transformation of grain processing; reducing production costs, improving agricultural efficiency and competition by developing appropriate scale management, reducing the unreasonable use of chemical fertilizers and pesticides, and developing social services, etc. Strengthen the weak links of agricultural supply, such as agricultural infrastructure, and increase the production of agricultural products that are in short supply in the market.
Fang Weifeng, deputy to the National People's Congress and director of the Shaanxi Development and Reform Commission, believes that the level of agricultural modernization should be further improved at present. The increasing public demand for fruits and deep-processed agricultural products and the large amount of imported milk purchased by consumers indicate that we have left the era of eating only primary agricultural products such as grain and meat, but the characteristic, diversified and refined agricultural products can not meet the needs of consumers. This shows that China's agricultural products need to be upgraded urgently, and it is also one of the directions of agricultural supply side reform.
Zang Yunpeng also believes that in order to solve the problem of excessive grain stocks, both sides of supply side and demand side should exert their efforts simultaneously. Especially, the reform of demand side also has tremendous space to tap. Among them, policy-oriented domestic demand is a channel for rapid release of grain stocks. At the same time, several delegates suggested that in-situ processing and transformation is the most direct, effective and economical means to digest stocks. They also suggested that the state should adopt directional pricing and directional bidding for grain stocks and give priority to selling to deep-processing enterprises, while encouraging the export of finished products from deep-processing enterprises of agricultural products.