Food grain prices are low farmers market to reproduce the phenomenon: low prices and inventories are the main cause of

Updated: October 20, 2015  Views: 44

The healthy operation of the grain market policy reforms needed

Author: He Jun

Domestic grain harvest this year, but the farmers are not happy, because prices could lead farmers' income fell straight down. Since the autumn, corn, wheat prices fell in all major grain producing areas to varying degrees. Corn prices fell significantly, farmers price The average fell more than 20%, the highest decline of 30 percent compared to last year, while wheat before the National Day also experienced a cliff-style decline. Currently, rice purchase price is generally stable, but in some areas than in previous years is also a small decline. prices fall food trade links brought no small impact, according to media reports, parts of the market into a serious panic atmosphere.

Market analysts have said the three staple food fell across the board in previous years, rare, low international prices and domestic inventory is deemed the decline in the current round of food grain market again this year, 'increasing output without increasing' 'Grain prices are low farmers,' the phenomenon, its impact will be multifaceted, worth extra attention.

First, food prices fell directly affect hundreds of millions of farmers' income, he estimated that this year's food prices could lead to a negative income growth fell one hundred billion, which has a direct impact on China to achieve a comprehensive well-off. Second, prices fell reducing farmers' income caused not only affect the consumer market. Third, food prices will lead to decline in the enthusiasm fell grain farmers and could lead to food price volatility in the second year.

In this situation, the Chinese how food policy as, on the need to be careful as in the opinion of our research team, hit the market this year, food prices fell, despite low international prices and domestic inventory backlog of 'causal factors' However, domestic prices defect acquisition and subsidies system, which may not be ignored institutional reasons.

China since 2004, full liberalization of the grain market and price, food price formation by the market after the liberalization of food prices, in order to protect the interests of farmers and seed grain, 2004, 2006, respectively, from the country in the main producing areas of rice , two key grain varieties of wheat the minimum purchase price policy (the 'prop up the market price'). Considering the national annual food costs and benefits, supply and demand, market prices, the macro-control and other factors to determine the wheat, the lowest price level of all varieties of rice and released to the community prior to crop planting, and guide farmers to plant, to boost food production after the new grain market, follow the market to sell grain farmers, the main producing areas of the market when prices fall more, below the minimum purchase price, the state designated enterprise (Grain Company ) in accordance with the lowest market price to acquire, a reasonable guide the market prices rise. Since 2008, the country for six consecutive years raise the minimum grain purchasing price of rice in 2013, the minimum purchase price of wheat increased to catty 1.39 yuan, 1.12 yuan, 6 years increase rate were 92%, 57%.

From the actual implementation, the prop acquisition policy to protect the interests of farmers though, but need to pay subsidies (indirect subsidies by the government to purchase and sale of state-owned enterprises), a direct consequence of this new form of price subsidy policy is to increase the market price of grain sales, distorts the market determines the price. In this price distortions, one high subsidy costs, a large number of state financial subsidies into the acquired company and reserve links directly benefit small farmers, and second, to raise the downstream food industry, processing costs, can not pass market-oriented approach to optimize the allocation of resources, the entire downstream industry to suffer, directly blocking the smooth flow of agriculture whole industry chain, affect the healthy operation of the agricultural industry.

For example, Heilongjiang Province confusion because the food subsidies, resulting in this year thousands of enterprises have ceased production is not subsidized food, lots of food at high prices subsidized by state-owned enterprises after the steady flow of income from farmers at the national reservoir, but the processing companies can not get a reasonable price unprocessed, grain storage warehouse infested grain actually, there are delays in grain warehouse into the production and consumption of above 88 Heilongjiang scale soybean processing enterprises, more than ninety percent of enterprises have ceased production in corn in Jilin province corn processing enterprises GBT private recently forced to stop production, the Government had then set the background of local state-owned enterprises, there is also a reason for the price subsidy policy.

The United States and the European Union on agriculture and farmers have a huge subsidies, but subsidies will be close to their market, and subsidies systematic EU subsidies into direct subsidies and price supports two price support means within the scope of the EU To use a unified agricultural prices, market prices can be set freely within a limited range of the common price, once beyond this range, the Community should intervene to make it return to the set range. price mechanism common agricultural policy consists of three parts : target price, intervention price and the threshold price is based on direct subsidies to agricultural production in different regions per unit, to provide a direct monetary subsidies.

From 1933 the United States began to use agricultural subsidies tool, 80 years evolving agricultural subsidies, while bypassing the WTO [microblogging] rules, on the other hand the balance of domestic and foreign price relationships to ensure that the price advantage in international trade of agricultural products in the United States the greatest technology. Specifically, the US agricultural subsidies are divided into the loan deficiency payments, direct income support, counter-cyclical subsidies, resource conservation subsidies and agricultural trade subsidies five categories. In 2005, the amount of agricultural subsidies in the United States amounted to $ 25 billion, compared with 2001 an increase of 68%.

If you compare the amount of subsidies, food subsidies and Chinese money spent on purchasing and storage and a lot. There are statistics that now the central government annual agricultural subsidies has more than 1 trillion yuan (including food price subsidies), while purchasing and storage of food costs reach several hundred billion dollars a year. Such a high financial investment, but will not lead to a significant increase farmers engaged in agricultural income, as well as a smooth running of the agricultural market, why is it so? How should reform? These questions can not be avoided.

Overall, food prices lead farmers to reduce, can not press the way past, a simple adjustment subsidies trouble, but should be based price mechanism system reform. In our view, the core is to play the role of market mechanisms adjusted target subsidies, increase direct subsidies to farmers and increase their income. In view of the prop acquisition brought serious distortions grain market prices, to promote food price formation mechanism reform and government subsidies decoupled, under the protection of the interests of farmers premise promote minimum purchase price, temporary storage and agricultural subsidies gradually shift to produce the target price system.

Prices fell affect farmers' income and consumption, but a manifestation of China's grain price policy issues. Formation mechanism around food prices, China need to be careful, systematic, but firmly push forward reforms to aid financial subsidies, and ultimately to achieve food market healthy operation and normal development.

(The author is a senior researcher Ampang Consulting)


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