Hu Glacier: Market Analysis and Policy Evaluation of China's Agricultural Products

Summary: In recent years, the overall price of China's agricultural products has remained at a relatively high level; and in the market operation of agricultural products (especially grain, cotton and other bulk agricultural products), there has been a self-contradiction of high production, high consumption, high imports, and high inventories. phenomenon. At the same time, China's agricultural policy is also facing the "floor" of higher production costs and the "ceiling" of prices. To this end, this paper first briefly combs the operation of the global and Chinese agricultural products market in the recent period, and on this basis focuses on the analysis and evaluation of the main policies of China's agricultural products market. This paper holds that the implicit condition of China's agricultural product market policy logic is that the overall level of agricultural product prices rises, and under the background of the global economic downturn and the long-term decline of agricultural product prices, the entire Chinese agricultural product market policy system will face great impact, such as price inversion, subsidy "yellow line", agricultural product smuggling and so on. Finally, focusing on the long-term development of China's agricultural production, this paper holds that the focus of policy should be to ensure agricultural production capacity and improve agricultural production efficiency, and it is meaningless to pursue the growth of output quantity. Therefore, in the future, we should establish a three-dimensional agricultural policy system, namely China's agricultural safety net, which can share agricultural risks, make independent production decisions, and comprehensively use policy tools such as monitoring, negotiation, subsidies, insurance and credit.

Keywords: Agricultural products market-linked subsidies Production efficiency Agricultural safety net.

Overview of Global Agricultural Products Market in 1.

According to the January 2015 World Economic Outlook report, the global economic growth rate is expected to be 3.5 per cent in 2015 and 3.7 per cent in 2016, both 0.3 percentage points lower than the October 2014 World Economic Outlook forecast. The main reason is that the price of oil in US dollars has fallen by about 55% since September 2014. The decline in oil prices is partly due to unexpected demand weakness in some major economies, especially emerging market economies. There are significant differences in economic growth among major economies. Among them, the recovery of the United States economy is stronger than expected, while the economic performance of other major economies (especially Japan) fell short of expectations. The United States dollar appreciated by about 6 per cent relative to the real effective exchange rate used in the October 2014 World Economic Outlook. Conversely, the euro and the yen have depreciated by about 2 per cent and 8 per cent, respectively, and the currencies of many emerging market economies have also depreciated. Interest rates and risk spreads have risen in many emerging market economies (especially commodity exporters), and risk spreads on high-yield bonds and other commodities exposed to energy price risk have widened. Dragged down by weak global economic growth, global commodity prices have fallen rapidly, and agricultural prices have also been affected, with a sharp correction. According to the estimation of the Food Outlook of the United Nations Food and Agriculture Organization, the global agricultural production in 2014 can be simply described as follows: 2.5 billion tons of grain, including 0.7 billion tons of wheat, 1.3 billion tons of coarse grains and 0.5 billion tons of rice; The output of oil is 0.54 billion tons, cassava is 0.29 billion tons, and sugar is 0.18 billion tons. The total meat output is 0.31 billion tons, of which 0.12 billion tons are pork, accounting for 37% of the total meat output. Milk output 0.79 billion tons, the output of aquatic products is 0.17 billion tons. Global agricultural output is at an all-time high and still has strong growth potential. According to data released by the Food and Agriculture Organization of the United Nations, the global food price index was 201.8 in 2014, down 3.8 percent from the 209.8 in 2013. Although the overall decline was modest on an annual basis, on a monthly basis, the global food price index fell by 3.8 per cent from a record high in mid -2014. This means that global food prices fell rapidly in the second half of 2014 (see Figure 1).

In terms of food categories, in 2014, the global grain price index was 191.9, a sharp drop of 12.5 percent from the 2013 219.3; the edible vegetable oil price index was 181.1, a drop of 6.2 percent from the 2013 193.0; the sugar price index was 241.2, a drop of 3.9 percent from the 2013 251; the dairy price index was 224.1, a drop of 7.7 percent from the 2013 242.7; the meat price index was 198.3, that's up 7.7 percent from 184.1 in 2013. On the whole, the trend of the global agricultural product price index has gradually returned to the market fundamentals after 2013, so the price has been supported to a certain extent. Except for individual agricultural products, there has not been a sharp drop like oil prices. The meat price index has risen overall. Therefore, the most critical factor affecting the global agricultural product market in 2014 comes from the loosening of the balance of supply and demand, such as: the global grain harvest has brought about a relatively loose grain market, especially the increase in corn production in the United States and China; the weak growth of China's dairy imports has led to a downturn in global dairy demand; The increase in sugar production has further exacerbated the oversupply pattern. Judging from the perspective of market fundamentals, global agricultural prices will remain low for some time.

Overview of China's Agricultural Products Market in 2.

According to data released by the National Bureau of Statistics, in 2014, the country's total GDP was 63646.3 billion billion yuan, a year-on-year growth rate of 7.4 percent. According to the "Economic Blue Book: Analysis and Forecast of China's Economic Situation in 2015" of the Chinese Academy of Social Sciences, China's economic growth rate will drop to 7% in 2015. The 2014 Central Economic Work Conference pointed out that China's economic development has entered a new normal and is shifting from high-speed growth to medium-to-high-speed growth. In this context, it is necessary to speed up the transformation of the mode of agricultural development, from simply pursuing quantitative growth to paying equal attention to quantity and quality, and take the road of modern agricultural development with high output efficiency, product safety, resource conservation and environment-friendly, so as to achieve sustainable agricultural growth. According to data from the National Bureau of Statistics, in 2014, the country's total grain output was 607.099 million tons, an increase of 5.16 million tons or 0.9 percent over 2013, achieving a historic "eleventh consecutive increase". Of this increase, 0.7 percentage points came from the expansion of grain sown area and 0.2 percentage points from the increase in grain yield per unit area. Under the background of relatively loose global food market and continuous domestic production increase, domestic food prices remained relatively stable in 2014. Judging from the fixed-base index 100 by 2002-2004, China's average food price index was 198.7 in 2014, up 3% from the 192.7 in 2013, and the rising trend of food prices has been curbed (see Figure 2).

In December 2014, the national food price index rose 2.9 per cent year-on-year, of which the food price index rose 3 per cent, the price index of meat, poultry and products fell 0.2 per cent, the price index of eggs rose 14 per cent, the price index of aquatic products rose 2.4 per cent, the price index of fresh vegetables rose 7.2 per cent and the price index of fresh fruits rose 10.4 per cent. In terms of urban and rural areas, the national rural food price index rose 2.5 percent year-on-year, of which the food price index rose 2.8 percent, the price index of meat, poultry and products fell 0.9 percent, the price index of eggs rose 13.7 percent, the price index of aquatic products rose 2.8 percent, the price index of fresh vegetables rose 5.8 percent, and the price index of fresh fruits rose 10.6 percent, among them, the food price index rose by 3.1 per cent, the price index of meat, poultry and products was basically flat, the price index of eggs rose by 14.1 per cent, the price index of aquatic products rose by 2.3 per cent, the price index of fresh vegetables rose by 7.3 per cent, and the price index of fresh fruits rose by 10.3 per cent.

From the perspective of China's agricultural product market, on the one hand, the supply is sufficient; on the other hand, the overall agricultural product price relationship has not been straightened out, and the fundamental contradiction of domestic and international agricultural product price inversion has not been alleviated. This has also led to the "destocking" of domestic agricultural products still taking some time. In addition, from a policy perspective, in 2015, China's minimum purchase prices for rice and wheat remained unchanged at the 2014 level, making the overall agricultural product price axis basically maintained at the 2014 level. On the whole, in 2015, domestic agricultural product prices, especially food prices, will continue to operate at a low level, and the main tone of the market is still the "destocking" of bulk agricultural products ".

3. Agricultural Market and Price

(I) food

for some time, China's grain market has been a "policy market". In 2014, the market of China's major grain varieties still maintained the consistent momentum in recent years, just like the "four high" situation of high yield, high consumption, high import and high inventory mentioned in the "Green Paper" in 2014, which brought a series of problems, such as the "ceiling" of the current agricultural subsidy ceiling and the "floor" of the increase of agricultural production cost. In fact, the policy distortion of the agricultural product market is not only reflected in the grain market, but also has penetrated into almost every variety of agricultural product market in China. Therefore, it is necessary to analyze the current systemic problems on the basis of combing the market and price of specific varieties of agricultural products.

1. Rice. According to data from the National Bureau of Statistics, in 2014, China's rice sown area was 30.31 million hectares, and the rice output was 0.206 billion tons, a slight increase from 2013. According to China Customs import and export trade statistics, in 2014, China imported 2.579 million tons of rice, an increase of 13.6 percent year-on-year; exported 419000 tons of rice, a year-on-year decrease of 12.4 percent. From the perspective of rice consumption, according to the data of the rice production and demand balance table released by the China Grain Network, in 2014, China's total consumption was 0.196 billion tons, of which 0.162 billion tons of rations, 16.6 million tons of feed grain and 13.1 million tons of industrial grain. The total domestic demand has been basically stable in recent years. It can be seen that the annual balance of rice in 2014 has increased compared with 2013. In addition, because rice smuggling has not been effectively curbed, the estimated smuggling volume in the industry is actually greater than the import volume of customs statistics. A variety of factors superimposed, in 2014, China's rice market to maintain the basic pattern of "policy market" has not changed. In terms of price operation, according to the data of China Grain Network, in 2014, rice prices rose slightly supported by the continued increase in the minimum purchase price, and the overall price level was slightly higher than the level in 2013. however, due to the slowdown in economic growth, loose market and low-cost imported rice, rice prices are generally weak. Judging from the price trend of rice throughout the year, it is generally shown as stable and strong operation from January to August, with policy auctions (hereinafter referred to as "auctions") dominating the market; from September to October, the high volatility fell, and the market was relatively loose; from November to December, the high level rose firmly, and the market was strongly supported. Specific to the two varieties of indica rice and japonica rice, although their market reactions are slightly different, this has not essentially changed the "policy market" attribute of the rice market.

2. Wheat. According to data from the National Bureau of Statistics, in 2014, China's wheat sown area was 24.06 million hectares, and the wheat yield was 0.126 billion tons, a slight increase from 2013. According to Chinese customs statistics, in 2014, China imported 3.004 million tons of wheat, a year-on-year decrease of 45.7; exported 190000 tons of wheat, a year-on-year decrease of 31.9. From the perspective of wheat consumption, according to the data of the wheat production and demand balance table released by the China Grain Network, in 2014, China's total consumption was 0.116 billion tons, of which 84 million tons of rations, 15 million tons of feed grain, and 11.75 million tons of industrial grain. The total domestic demand has been basically stable in recent years. In terms of price operation, according to the data of China Grain Network, in 2014, the domestic wheat market as a whole showed a pattern of loose supply and demand, and the wheat market price remained basically stable in the first half of the year; after the new grain was put on the market, the price was basically on the rise from June to September due to the start of the national market purchase and the reduction of grain sources in the market; in the fourth quarter, the wheat market price was stable and slightly weak at the end of the year.

3. Corn. According to data from the National Bureau of Statistics, in 2014, China's corn sown area was 37.08 million hectares, and the corn yield was 0.216 billion tons, which was slightly lower than in 2013. According to data released by the International Cooperation Department of the Ministry of Agriculture, in 2014, China imported 2.599 million tons of corn, a year-on-year decrease of 20.4; exported 20000 tons of corn, a year-on-year decrease of 74.2. From the perspective of corn consumption, according to the data of the balance sheet of production and demand released by China Grain Network, China's total consumption in 2013/2014 was 0.194 billion tons, including 13.6 million tons of rations, 0.126 billion tons of feed grain and 50 million tons of industrial grain. Relatively speaking, corn, as feed grain, is driven by the upgrading of residents' food consumption structure brought about by economic development, and maintains a basically upward market pattern in the medium and long-term trend. In terms of price operation, according to the data of China Grain Network, in 2014, the domestic corn market as a whole showed a trend of rising prices and local shocks. From January to June, under the influence of unprecedented temporary purchasing and storage, import return and temporary purchasing and storage of corn auction, the overall price of corn maintained a steady and rising trend; from July to September, the situation of periodic tension in the market did not improve, and the price of corn rose to a record high; with the successive listing of corn in the new season at the end of September and the release of temporary purchasing and storage of grain, coupled with the sluggish demand for feed, the tight market gradually eased; after October, the depressed state of the corn market has not been reversed, and the purchase price is generally high and then low. In November, affected by the overall economic environment, corn prices fluctuated and declined. In December, the market weakness became clearer. Although the corn market is supported by growth demand to a certain extent, in the short term, it is still affected by the overall economic environment.

4. Other. In 2014, the strengthening of domestic corn prices, coupled with the decline in corn imports due to problems such as import returns, directly led to China's imports of 5.413 million tons of barley, an increase of 131.8 percent over the same period last year; in the same period, China imported 5.776 million tons of sorghum, an increase of 4.4 times over the same period last year. According to the current observation, with the further improvement of the income level of urban and rural residents, the consumption of animal food will further increase, and the domestic feed demand can still get strong support for a period of time. In this case, the intervention of corn import and domestic market will inevitably lead to the growth of demand for corn substitute products. In 2013, the domestic breeding industry replaced corn with wheat and 2014 with sorghum instead of corn as feed, which are all examples. In the short term in the future, if the current domestic corn market policy thinking continues, due to the inversion of domestic and foreign prices, and the management of coarse grain imports is not strict, then the alternative imports of other coarse grains will still be inevitable, to a certain extent It will further increase, which may further deteriorate the domestic feed grain market.

(II) edible oil seed and edible vegetable oil

in 2013/2014, domestic soybean production was about 12 million tons, rapeseed production was about 9.5 million tons, and peanut production was about 14 million tons. In 2014, China imported 77.518 million tons of edible oil seeds, up 14.3 percent year-on-year, and exported 872000 tons, up 0.3 percent year-on-year. Among them, soybean imports 71.399 million tons, an increase of 12.7; rapeseed imports 5.081 million tons, an increase of 38.7. According to data from the National Grain and Oil Information Center, China's edible oil production was 25.056 million tons in 2013/2014, an increase of 5.7 percent over the same period last year. Among them, the output of soybean oil, rapeseed oil and peanut oil was 12.32 million tons, 6.377 million tons and 2.52 million tons respectively, up 6.6 percent, 8.5 percent and 2.8 percent respectively. In 2014, China imported 7.873 million tons of edible vegetable oil, a decrease of 14.6 percent. Among them, palm oil imports were 5.324 million tons, a year-on-year decrease of 11.0; soybean oil imports were 1.135 million tons, a year-on-year decrease of 1.9; rapeseed oil imports were 810000 tons, a year-on-year decrease of 47.0. However, the increase in imports of oilseeds such as soybeans, discounted at the oil yield, is sufficient to compensate for the reduction in imported oil and fat. Due to the weakening of the holiday effect of edible oil consumption and the reduction of terminal consumption demand, the supply of edible vegetable oil in China exceeded the demand in 2013/2014, with a balance of 2.226 million tons.

In terms of price operation, in 2014, the domestic edible vegetable oil market was affected by the overall economic environment, and the overall operation was weak. The prices of major domestic vegetable oils, driven by the sharp drop in international edible vegetable oil prices, hit a new low during the year. Domestic well-known edible vegetable oil processing companies have lowered the prices of small packaged oil in order to expand market share. For example, in December 2014, the price of 5-liter bottled soybean oil in the city was 10 yuan per liter, down 11% from 11.2 yuan in the same period in 2013. Coupled with the domestic oil market downturn, making the edible vegetable oil market situation more severe. In general, in the context of the global economic downturn and the loose edible oil seed and edible vegetable oil market, domestic edible vegetable oil prices will remain low in 2015, and the momentum for its recovery has not been shown.

(III) livestock products

according to data from the National Bureau of Statistics, in 2014, China's pig, beef, sheep and poultry production was 85.4 million tons, an increase of 2.0 percent over the previous year. Among them, pork production was 56.71 million tons, up 3.2 percent year on year. In 2014, China produced 28.94 million tons of poultry eggs, up 0.6 percent year-on-year, and 37.25 million tons of milk, up 5.5 percent year-on-year. According to customs statistics, in 2014, China's imports of livestock products totaled US $22.17 billion billion, up 13.6 percent year-on-year; exports totaled US $6.84 billion billion, up 5.0 percent year-on-year. Among them, pork imports were 564000 tons, a year-on-year decrease of 3.3 percent; beef imports were 298000 tons, a year-on-year increase of 1.3 percent; mutton imports were 283000 tons, a year-on-year increase of 9.3 percent; poultry imports were 472000 tons, a year-on-year decrease of 20.4 percent; milk powder imports were 1.054 million tons, a year-on-year increase of 22.0 percent. Since China became the world's largest importer of agricultural products in 2011, informal trade such as agricultural products smuggling has been expanding. The smuggling of rice, pork, beef, poultry and other livestock products has been high. According to industry experience, the current smuggling of livestock products is roughly the same as the import volume of customs statistics. In fact, in recent years, the number of livestock products from abroad in the Chinese market has been increasing rapidly, and there is a big difference between the actual situation and customs statistics. In terms of price operation, according to the price monitoring data of the Market and Information Department of the Ministry of Agriculture, the average price of pork in 2014 was 22.5 yuan per kilogram, down 7.6 from the average price of 24.3 yuan in 2013 (see Figure 3).

In 2014, beef and mutton prices remained relatively stable, while egg and milk prices hit record highs. Among them, the average price of eggs was 10.8 yuan per kilogram, up 9.4 percent from the average price of 9.9 yuan in 2013, and the purchase price of milk was 4.05 yuan per kilogram, up 11.9 percent from the average price of 3.62 yuan in 2013. In addition to eggs, the prices of major livestock products showed a gradual weakening process in 2014, which is also consistent with the trend of the entire economy. (IV) sugar and cotton

in the 2013/2014 sugar squeezing season, the country's total sugar output was 13.32 million tons; the consumption was 15.6 million tons; the total annual import volume was 3.486 million tons, a year-on-year decrease of 23.3; the final inventory reached 2.996 million tons, the highest level in history. Generally speaking, the domestic sugar demand is relatively stable, and the domestic sugar market is under strong pressure from the international market. In the context of the continued downturn in global commodity prices in 2014, domestic sugar prices also showed a downward trend in 2014, with the average price falling by 17.4 from 5385 yuan/ton at the beginning of the year to 4448 yuan/ton at the end of the year. Judging from the current situation of the international and domestic sugar market, although some analysts believe that there is an expectation of production reduction in the new squeeze season, considering that the current domestic sugar inventory is still at a historical high, the task of "destocking" in the market is still very arduous. Therefore, it is difficult for the domestic sugar market to obtain strong support in the 2014/2015 squeeze season, and the market is still dominated by a negative atmosphere.

According to data from the National Bureau of Statistics, in 2014, the national cotton sown area was 4.219 million hectares, a decrease of 127000 hectares or 2.9 percent from 2013. The output was 6.161 million tons, a decrease of 138000 tons or 2.2 percent from 2013. According to China's cotton market data on the U.S. Department of Agriculture's cotton production and demand balance table, China's cotton consumption is expected to be 7.95 million tons in 2014/2015, which is generally stable. For the whole of 2014, China imported 2.669 million tons of cotton, a year-on-year decrease of 40.7; cotton yarn imports were 2.01 million tons, a year-on-year decrease of 4.2. China's final cotton inventory in 2014/2015 was 13.75 million tons, accounting for 58% of the total global inventory of 23.65 million tons. From the perspective of price operation, due to the launch of the cotton target price reform pilot in Xinjiang in 2014, the price of reserve cotton was lowered, and the global cotton market was sluggish. In 2014, China's cotton prices showed a step-by-step decline. According to the China Cotton Price Index, in December 2014, the average price of 3128B cotton was 13743 yuan/ton, down 41.5 from 19447 yuan/ton at the beginning of the year.

Brief Summary of (V)

overall, in 2014, domestic agricultural prices overall downturn. According to the current situation, it is expected that in 2015, the domestic agricultural product market will remain low on the whole. Among them, the low price of international bulk commodities, especially agricultural products, is an important reason. In addition, the more fatal problem of the domestic agricultural product market is that due to the long-term dependence on policies, serious basic price distortions and inefficient financial subsidies have been formed. With more and more, huge inventories are becoming more and more difficult to maintain. The entire policy and market space are in a dilemma, making the road of "destocking" in the domestic agricultural product market increasingly difficult. To this end, it is necessary to re-evaluate the current domestic agricultural market policy.

Evaluation on Main Policies of 4. Agricultural Products Market

For a period of time, on the one hand, in order to maintain the stability of the domestic agricultural product market, the finance needs to pay a large amount of agricultural product storage, purchase loan interest and other expenses; on the other hand, under the background of the inversion of international and domestic agricultural product prices, the cost of domestic agricultural product processing enterprises has increased and their competitiveness Decline, and smuggling has been repeatedly banned. It can be considered that the two policies of minimum grain purchase price and temporary purchase and storage are no longer in line with the needs of the current agricultural product market development to a large extent. Therefore, in 2014, the Chinese government launched a pilot reform of the target price of soybeans in Northeast China and cotton in Xinjiang, hoping to straighten out the price formation mechanism of agricultural products through the target price and achieve the goal of stable production. In fact, whether it is the minimum purchase price, temporary purchase and storage or target price subsidies, they are all price stimulus-oriented and linked subsidies for specific agricultural products. Regardless of whether the current linked subsidy expenditure touches the "yellow box" ceiling in the WTO agricultural agreement, it is also necessary to reflect and re-evaluate the current agricultural product market policy from the aspects of policy objectives and policy effects. Whether it is the decision of the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China to "make the market mechanism play a decisive role in the allocation of resources", or the "No. 1 Document" of the Central Committee in 2015 pointed out that "to improve the price formation mechanism of agricultural products and increase farmers' income, it is necessary to maintain agricultural products." Reasonable price level "actually implicitly expresses concerns about traditional agricultural product price support policies such as minimum purchase prices,, due to a variety of factors, such as policy continuity, it is not stated. Therefore, in 2015, the central "No. 1 document" proposed to "summarize the Xinjiang cotton, northeast and Inner Mongolia soybean target price reform pilot experience, improve the subsidy mode, reduce operating costs, to ensure that the subsidy funds in full and timely cash to farmers. Actively carry out agricultural product price insurance pilot. Reasonably determine the grain, cotton, sugar, meat and other important agricultural products reserve scale". This also shows that from the policy decision-making level, the central government has intended to make new attempts.

1. Policy objectives. There is no doubt that the minimum purchase price and the temporary purchase and storage policy are essentially price support for rice, wheat, corn, soybeans, rapeseed, sugar, and cotton. Taking the minimum purchase price as an example, the basic policy idea is: when the market price is higher than the minimum purchase price, the market will spontaneously adjust supply and demand; when the market price is lower than the minimum purchase price, the China National Grain Reserve Management Corporation will follow the minimum Purchase at the purchase price to ensure the interests of grain farmers. The goal of this policy is to provide a foundation for market risks and ensure farmers' income from growing grain, so as to achieve stable and increased grain production. From an objective point of view, this policy goal has been achieved, but it is accompanied by continuous inventory growth, long-term domestic and foreign price inversion, and distortions in the basic price of agricultural products, and these problems are difficult to eliminate in a short period of time.

The key problem of the minimum purchase price policy is to disrupt the production order of grain and other staple crops through asymmetric price support policies, so as to achieve the goal of stabilizing grain production. Of course, temporary purchasing and storage also has a part of the policy meaning of ex post relief, but its essence is the same as the minimum purchase price policy, that is, to reduce market risk through policy support and ensure the stability of grain income. According to the 2014 "National Agricultural Product Cost and Income Data Compilation" data, since 2008, the average net income per mu of China's three major food crops was the lowest in 2013, at 72.9 yuan, and the highest in 2011, at 250.8 yuan, with an average of 200 yuan. Therefore, it can be argued that the minimum grain purchase price policy guarantees farmers' income. However, the problem is that in the long run, the overall resource allocation efficiency of China's agriculture will become lower and lower. Under the pressure of long-term downward food prices, the minimum purchase price policy will eventually end when the government cannot afford subsidies. There is no doubt that for China, there is nothing wrong with stabilizing grain production and ensuring farmers' income from growing grain, but the overall policy goal of agriculture actually needs to include improving agricultural production efficiency. The household contract management system actually achieves efficiency improvement through the transfer of rights, and the current price market reform should be to let the risk mechanism force the optimization of agricultural production decision-making, so as to improve the efficiency of agricultural production. Without a risk mechanism, there can be no market-oriented reform, and it must not be the way of market economy to win or lose.

2. Policy logic. The policy logic and derivation of the minimum purchase price and temporary purchase and storage can be summarized as follows: when the market price is higher than the minimum purchase price, the market mechanism works; When the market price is lower than the minimum purchase price, the government starts the minimum purchase price and earns through the inventory mechanism, and then realizes the favorable price sales through the inter-period balance mechanism. When the market price is lower than the minimum purchase price, the income through the inventory mechanism can not realize the favorable price sales, when the market price is lower than the minimum purchase price, the income through the inventory mechanism, if the inter-period balancing mechanism can not achieve the price sales, and can not use the market dominance to achieve the price sales, then further expand the inventory. So cycle back and forth. This policy logic is basically effective for a period of time, at least from 2004 to 2011, and has been affirmed by many parties; since 2012, the policy has been controversial in China. In fact, the implicit background of this logic is the rise of the axis of the overall price of agricultural products. In short, when food prices fall in individual years, it only needs to increase a part of the inventory and take time to achieve the inventory return to the set level; however, the long-term deep decline in food prices will make the inventory higher and higher, which will bring New threats, that is, when food stocks increase, the huge scale not only threatens the stability of the agricultural product market, but also poses a threat to the entire agricultural production and agricultural product consumption system. For example, when the scale of rice and wheat stocks continues to expand, the demand for rice and wheat remains stable, so that the incremental part forms new stocks. The excessive production of grain has squeezed the production resources of other agricultural products, which makes the output of other agricultural products relatively decline, and brings about the unreasonable allocation of the whole agricultural production resources. This irrational allocation of resources will also threaten China's food security with changes in the dietary structure of the population, meaning:

in the consumption structure, the production of cereals with decreasing demand is increasing, while the supply of food such as meat, eggs and milk, which is in increasing demand, is insufficient, eventually leading to a passive import situation in China in which food has to be imported due to the inversion of domestic and foreign prices and meat, eggs and milk have to be imported due to insufficient supply.

3. Policy effects: the case of cotton. According to the description of the 2013 "Green Paper", on September 10, 2012, China Cotton Reserve Management Corporation (hereinafter referred to as "China Cotton Reserve") launched the 2012 temporary cotton purchasing and storage plan. Standard grade 328 lint cotton was purchased and stored at a price of 20400 yuan/ton. As of January 25, 2013, China Cotton Reserve had purchased and stored 5.951 million tons of cotton, about 80% of the cotton output this year. If these cotton are stored for one year, the central government will only purchase loan interest subsidies will reach 3.4 billion yuan. In 2013, China Cotton Storage collected and stored 6.58 million tons of cotton (including 4.28 million tons in Xinjiang) at the price of 20400 yuan/ton. Further, as the government launched the Xinjiang cotton target price reform pilot in 2014, on April 1, 2014, the reserve cotton bidding price was adjusted to 17250 yuan/ton. According to the China Cotton Information Network, by the end of August 2014, a total of 2.645 million tons of cotton reserves had been sold in 2013. Apart from storage fees and interest discounts, the actual price difference loss paid by the finance was 8.3 billion yuan. According to the 12.57 million agricultural population in Xinjiang, the price difference loss of this part of cotton reserves alone was equivalent to 663 yuan per agricultural population. Xinjiang's cotton planting area accounts for 1/3 of Xinjiang's total crop planting area. If the number of cotton farmers is calculated according to this, then, this part of the subsidy is equivalent to 2000 yuan per cotton farmer. If calculated according to the total financial loss and cost, it may cost more. However, the actual subsidies received by farmers are not so much, here part of the financial costs and losses are "unnecessary losses", that is, no one benefits from it, does not belong to the concept of redistribution of wealth, these losses belong to the resource mismatch brought about by the loss of efficiency. The cotton market is a more typical case. The rice, wheat, corn, soybean, sugar, and rapeseed markets are roughly the same, but the situation is not as extreme as the cotton market. It is understandable that in the process of policy and market gambling, policy has won the goal in the short term and lost efficiency in the long term, which is not sustainable. To this end, the government launched the Xinjiang cotton target price reform pilot, which triggered the price support "yellow box" subsidy "yellow line". According to the specific operation, from top to bottom: if the "total plate" of the financial budget required for the target price is determined, then the target price will eventually evolve into a "new direct subsidy" decomposed according to the summary data; If the "total plate" of the financial budget required for the target price is not determined and implemented according to the ideal plan, has the finance made corresponding preparations in the continuous downturn of the market, for example, dealing with the market's overshoot is crucial. The former is actually a "green box" in a sense, but it has been "yellow boxed" by itself; the latter is a test of fiscal efficiency and financial strength. In short, in the agricultural market

in the context of the continued downturn, the old and new policies are inadequate.

5. 2015 Trend Judgment and Policy Thinking

(I) 2015 trend judgment

in 2015, both the new global economic situation and the new normal of China's economy actually included the concept of structural upgrading, that is, traditional industries and markets were basically stable, and emerging formats and demand gradually emerged. In this process, it is difficult for commodity prices to obtain effective support and will remain depressed for some time to come. From the domestic situation, with the further improvement of the income level of urban and rural residents, the total demand for agricultural products will further increase, but the demand structure will undergo new adjustments. In the short term, due to the downturn in the global commodity market, especially agricultural products, and the high domestic stocks of grain, cotton, and sugar, the negative atmosphere in the market will remain for some time.

(II) policy thinking

an important contradiction in the current domestic agricultural product market is the structural imbalance between supply and demand. From the point of view of rations, rice and wheat have been increasing for many years and stocks are high, while the consumption of rice and wheat rations has reached its peak. At this time, it is meaningless to further increase the production of rations. As mentioned earlier, this increase in production also leads to inefficiencies in the allocation of resources, leading to competitive demand for resources in the production of other agricultural products, which in turn raises the cost of agricultural production. At present, there are two reasons for the increase of agricultural production cost in China: the efficiency imbalance between industries. The industrial sector has higher labor productivity, thus providing a more competitive wage rate, while the increase in production costs in the agricultural sector is only a concrete manifestation of relatively low production efficiency and is the inevitable result of the economic system under the role of the market. The resource allocation of agriculture itself is inefficient. There is a natural mismatch between natural resources, labor, and capital. The allocation of agricultural resources should have been optimized through the decentralized decision-making and risk mechanism of the market economy. "You have to tie the bell to untie the bell". The root of a series of problems in the current agricultural product market is technical problems at the level of productivity, and policy problems at the level of production relations. Whether it is the "floor" of costs or the "yellow line" of subsidies, even if it cannot be solved at the same time, at least one of the dilemmas can be solved through policy adjustments. Policy ideas can include: 1. The decoupling of linked subsidies. Theoretically, a linked subsidy for the production of any one agricultural product would involve discrimination against the production of other agricultural products. There is nothing wrong with adopting linked subsidies under specific conditions to achieve specific policy objectives, but in the long run, there will be many specific problems: minor problems, such as linked subsidies for specific agricultural products, lead to the failure of normal crop rotation, farmers continue to use chemical fertilizers and pesticides in order to obtain higher returns, making it difficult for agricultural ecology to recover naturally; Major problems such as the market distortion mentioned above. "Grain is basically self-sufficient, and rations are absolutely safe" in a sense emphasizes not the amount of output, but the strength of production capacity, maintaining a certain level of inventory, maintaining a strong production capacity, so that food production can be stable and sustainable. In this context, the "No. 1 Document" of the Central Committee in 2015 proposed to "continuously enhance food production capacity", which expresses this meaning. Therefore, linked subsidies will touch the "yellow line" of subsidies externally, while reducing the efficiency of resource allocation internally, and should gradually "decouple" linked subsidies ". Considering the weakness of agriculture and the differences in productivity between industries, the focus of subsidies can be shifted to income subsidies.

There is a fear that after the decoupling of subsidies, agricultural production, especially food production, will fall sharply. Maybe in the short term, but not in the medium to long term. Due to the advancement of urbanization and industrialization, large-scale agricultural operations are an inevitable trend. From the perspective of agricultural production, farmers must still give priority to land-intensive food crops in field planting. This endogenous mechanism determines the withdrawal of linked subsidies. The decline in grain production is limited, and this limited decline is a necessary prerequisite for straightening out the current agricultural product price formation mechanism.

2. The construction of China's agricultural safety net. The "decoupling" of linked subsidies is not the government's evasion of responsibility, so that agricultural producers are exposed to complete market risk, but to build a new type of agricultural market risk sharing mechanism. The minimum purchase price and temporary purchasing and storage will eventually transfer the market risk to the government level, which has played a great role under certain conditions, but it is not a long-term mechanism. In the long run, it is necessary to build a systematic agricultural policy system such as China's agricultural safety net. From a strategic point of view, China's agricultural safety net should proceed from the needs of agricultural risk management, be market-oriented, and aim to ensure the income of agricultural producers, and build a clear, focused, and coordinated agricultural support policy system. From an operational point of view, we can learn from the experience of the American agricultural safety net, and fully consider the specific conditions of China's agriculture, comprehensively use the monitoring system, negotiation strategies, income subsidies, insurance and credit and other policy tools to actively and steadily promote the formulation and implementation of relevant policies to provide comprehensive and multi-level three-dimensional safety net protection for agriculture. In any case, the focus of all policies should be to ensure agricultural production capacity and improve agricultural production efficiency. It is meaningless to simply pursue the growth of output quantity. Through the construction of China's agricultural safety net, the prevention and control and compensation mechanism of agricultural natural risks and the sharing mechanism of market risks are established, and the final decision-making power of agricultural production is returned to farmers. China's agriculture has gone through thousands of years of development, and it is impossible to have collective irrationality brought about by individual rationality at the production level. However, the spider web operation of the agricultural product market is not a problem that can be solved through policies. The premise of "better play the role of the government" is to clarify where the policy will end.

6. epilogue

on the whole, China's agricultural product market will remain weak for some time to come, which will expose current policy problems. To solve these problems, it is necessary to adjust and revise China's agricultural product market policy. From the perspective of system and operation, the idea of policy adjustment should be that the policy tends to be "green boxed" and simplified. From a practical point of view, in the face of the dilemma of the "floor" of increasing domestic agricultural production costs and the "yellow line" of subsidies, it is impossible to solve these two problems at the same time at this stage. Therefore, to solve one of the problems through policy adjustment is progress, which is also in line with China's consistent strategy of gradual reform. After the promulgation of the US "farm bill" in 2014, the "yellow box" subsidy in the United States has dropped to a very low level. The factors that promote this change may come from the pressure of WTO agricultural negotiations, but more from the pressure of domestic agriculture itself. For China, the "green box" of agricultural market policy is more from the pressure of domestic agriculture itself, which is consistent with the United States. From the operational level, the agricultural product price policy has a tendency to become increasingly complex. Whether in theory or in practice, complex policies will inevitably bring greater technical losses, and the bias in implementation is even more difficult to estimate. Therefore, China's agricultural product market policy must be extremely simple, similar to direct subsidies for grain production. It is believed that through the dynamic adjustment and revision of policies, China's agricultural production efficiency will make greater progress in the future.

Source: China's Rural Economy, Issue 4, 2015 | Editor: Zhai Tianchang