For the first time in six years, China has on the whole seen its grain prices soaring this year, signaling a vital change in domestic food supply and demand. What has brought about this price rise and how are people reacting to it?
It is difficult for farmers to sell their farm produce: they often get only IOUs for their grain and the more they grow, the more losses they incur … These and similar images are probably what will come to people’s minds at the mention of farmers and grain, which have often appeared on TV screens and in newspapers in the past. Things have changed this year, with farmers and grain once again becoming a media focus.
Agricultural experts point out that rural economic reform does not mean that China should cut down on grain production. They propose that local governments should take the opportunity of price rises to improve relevant policies for facilitating the balance of food supply and demand, strengthening farmland protection, and increasing investment in the industrialization and modernization of grain production.
An executive meeting of the State Council was held recently on major agricultural issues to study ways of increasing farmers’ income and to protect and improve the country’s grain production capabilities. The meeting also decided upon five more direct, more explicit and more vigorous steps for increasing farmers’ income next year—this is another major move towards improving farmer’s livelihood since 18 measures launched in July this year. In the recent Third Plenary Session of the 16th Central Committee of the Chinese Communist Party, rural economic reform was ranked fourth among the most urgent issues the central government was determined to address. Urban residents also began to feel the importance of agriculture and grain as they saw prices for staples such as wheat, rice and maize increase to different levels.
Zhengzhou Grain Wholesale Market is the largest grain wholesale market in China, and grain prices here are regarded as a barometer for the country as a whole. When a batch of wheat produced in 1998 was auctioned at the market last month, the price per ton unexpectedly rose from 1000 to 1090 yuan in a single minute.
Official statistics show that recent prices for rice in east China’s Anhui Province reached 1050 yuan per ton, up 80 to 120 yuan over the same period last year. The purchase price for wheat in northeast China’s Heilongjiang Province rose by 32 percent to 1100 yuan per ton. The price of maize in Hebei and Shandong provinces also went up by 50 to 70 yuan per ton. The rise in grain prices also drove up the prices of edible oil, flour and other processed products. The soaring prices, indicating an end to the long-term oversupply of grain, have brought gloomy farmers a brighter prospect for grain sales.
In Helongjiang Province, grain dealers are busy competing over the purchase of soybeans.
October is harvest season in Anhui Province. The purchasing price of oil seed and rice increased by 20 and 10 percent respectively compared with last year.
MEI GUISHENG, Director of Grain Bureau, Anhui Province, said, “The main reason for this is the reduction of output all over the country this year. Also gross grain production has dropped in the past few years, so that the relationship between supply and demand has shifted. In particular, Anhui province suffered from severe floods this year and output was very low. It is normal for grain prices to increase under such circumstances.”
Floods in the whole Huaihe drainage area this summer and parts of the Yellow River area early this autumn didn’t cause losses as severe as those of 1998, but the disaster-stricken areas are all major grain producers. Statistics show that the total grain output in Anhui Province declined by 10 billion kilograms compared with the previous year, a record low since severe floods struck the Huaihe River 12 years ago.
LU LIANGSU, Director of China Agricultural Specialists Advisory Committee, said, “Natural disasters were very severe this year: both floods and droughts, of which droughts accounted for 70 percent. ”
Severe droughts occurred in 12 provinces in southern China this summer, Zhejiang, Hunan and Fujian experienced their most serious droughts since 1971; while Jiangxi province hasn’t seen such a drought for a hundred years: there was a large acreage of farmland there that didn't yield a single crop.
Quite coincidentally, Europe and North America also experienced severe droughts this year and grain output was greatly reduced. Fluctuations on the international market also affected the market price of some domestic farm produce.
YU JUNLI, Chief Analyst of Beijing Green Future, said, “The main reason is that the soybean output on the international market was substantially reduced. The United States harvested more than 10 million tons less overall, and the domestic market suffered from a 10% reduction. This resulted in a temporary short supply of soybeans and a rapid increase in prices. ”
WANG WEINONG, Associate Researcher of Macroeconomic Research Institute, said, “I don’t think there’s any fundamental reason for the present price increase. I think it’s a temporary phenomenon. It won’t last as long as it did in the past when there was very short supply of grain. The background circumstances are different. ”
Farmers suffer great losses when grain prices are low. With the rise in price, enthusiasm for grain production will be enhanced and, like farmers, urban residents have begun to show unprecedented interest in the problem. It is under these circumstances that the State Council has put forward concrete policies for increasing farmers’ income, and protecting and improving farmers’ capacity for agricultural production.
Wang also said, “The first thing is to take substantial measures to protect arable land, because arable land is the most fundamental resource for grain production. The level of the grain production will be improved only if the land is well protected. ”
Farmers in many parts of China earned more money selling their farm produce than they were able to in past years. Price increases are part of the reason; it is also closely related to a reform in the policies on agricultural readjustment and subsidies. Farmers now get the entire national subsidy in cash or as offset to their taxes. In the past, they could only get 10 percent of the subsidy in cash through an indirect price allowance by the grain-purchasing organizations. Today, the new policy has been substantially implemented and the farmers can get more cash and less IOUs.
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