Food Law Might Unveil Due to High Costs of Grain Production

In the 2011 National State Grain Administration director meeting held recently， the head of State Grain Administration pointed out that Chinese grain enterprises purchased 602.2 billion jin of grains for the year 2010， which surpassed 600 billion jin for the fi rst time in history. Among these 61.3 billion jin of grain and oil were purchased at a protecting price from farmers.Wei Chaoan， deputy minister of the Ministry of Agriculture， also said that in the long run the stable development of grain production is both limited by the external environment， and also its internal defi ciencies; and both deep and chronic contradictions and new problems will be intermingled.Currently， Chinese grain production stays at a basic supply-demand balance， but the product structure problems are still signifi cant. T e self-suffi ciency rates of paddy rice， wheat and corn reached 100%， but the supply of round-grained rice is pro limited. Moreover， the soy bean supply still has a huge shortage. It is estimated that the demand for grain-rounded rice will grow by more than 25 billion jin until 2015， when the supply-demand disparity would become more prominent. T e demands for edible vegetable oil and protein feed have been rising sharply， which could only be met through imports. T e selfsuffi ciency rate for soy bean is only about 30%. Considering these， it is very important to heed grain structural balance as well as achieve a grain production balance， especially increasing the production and supply for those grain varieties in shortage.In addition， the surging prices of energy resources， such as coal， oil and natural gas， prompted the rise in the price of agricultural inputs. Also， the recent years witnessed a rising trend of land transferring and contracting fees， which has lifted the land costs to 20% of the overall grain production costs. If considering the climbing labor costs， the Chinese grain production has slid into a new age of high costs.Analysts point out that as local governments combat droughts and recover grain losses， farmers also contribute inputs into the fi eld that leads to the rising grain production costs. Also， due to natural disasters， the possibility for reductions in wheat quality will become higher， and thereby the shrinking supply of quality wheat and the demand in the market will keep the quality wheat price strong in the long run; what’s more， as profi ts from grain production contract that makes people less willing to do farming， and the fi eld management is hard to be ensured after serious natural disasters， these factors would bring negative impacts on production and quality of wheat. Now， although the national wheat storage is adequate， and the launch work of temporary reserve has not relaxed， problems like the regional grain reserve imbalances and diff erent wheat quality might lead to market changes.What’s more， people with inside knowledge said recently that: “some large grain processors have received notice of stopping corn purchases， to enable China Grain Reserves Corporation to purchase enough corns.” T is piece of information was confi rmed by the statement from another corn processor in Jilin Province， which said that some local processors， including Dacheng Group， have stopped purchasing corns from farmers.”As a matter of fact， the rising price in grain and oil last year was partly due to the higher protecting purchasing price than previous years. T erefore it is very obvious that the grain purchase at protecting prices fuelled last year’s infl ations. T e deep reason actually lies in the structural reforms of the oil and grain market. It is not the fi rst time that this protecting purchase has disturbed the market order. During the fourth quarter of 2006， the domestic grain price once kept surging because the China Grain Reserves Corporation purchased grains at lowest price， which led to short supply to the market， but did not timely launch the reserves to tame the infl ations.Some people also criticized that the current reforms in the grain circulation system does not only imply the breakdown of the monopoly in protecting purchase， but also a reform of a grain protecting purchase system under the guide of planned economic principles， to reshape the grain circulation market. T e appearances of market misbehaviors， like raising grain prices sharply or conspiring to drive up prices derive from the low transparency of the grain market information， dysfunction of the endogenous pricing system and the disturbance on grain production and agricultural resource allocation from the government price control.Under the guidance of the State Reform and Development Committee， the State Grain Administration has revised its drafted “Grain Law” for 5 to 6 rounds and asked for opinions from related departments within the State Council and local governments. It is estimated that during the sessions of NPC and CPPCC this year， the “Grain Law (preliminary draft)”will be delivered to the standing committee of the National People’s Congress for fi nal approval. People with inside knowledge say that if the draft passes approval at the congress， the “Grain Law” will be enacted within 5 years.Besides these， the central government has recently allocated RMB 98.6 billion as direct subsidies to grain production and agricultural funds， rising by 14% compared with the previous year. Among these， the comprehensive subsidies to agricultural funds reached RMB 83.5 billion， while the direct subsidies to grain productions reached RMB 15.1 billion.