In Commodity News 26/05/2015
The Chinese government has faced growing pressure to review its longstanding policy of maintaining a stockpile of grain as more people have complained of grain prices well above international levels caused by the policy.
Han Jun, deputy director of the office for the central leadership panel for finance and economics, admitted after-tax (50% duty) CIF prices for imported grain in China are much lower than for domestic grain, 0.5 yuan (US$0.08) cheaper per jin (0.5 kilo) for maize, 0.35 yuan (US$0.05) per jin for wheat, and 0.5 yuan per jin for rice.
The income for farmers remains incredibly low, meanwhile, with per capita annual income in rural areas reaching only 9,892 yuan (US$1,595) in 2014, according to the National Bureau of Statistics. As a result, farmers have migrated to urban areas in massive numbers in search of a better life.
The business channel of web portal Sohu.com attributes the low price of imported grain to advanced agricultural technology boosting output and large-scale mechanized farming lowering costs. In the United States, for instance, a farmer can cultivate several thousand acres using machinery, including the use of small planes to spray pesticide. In China, by contrast, farming is still mostly carried out by older men and women without much modern agricultural know-how on small plots of land.
The plight of local farmers has been aggravated by unscrupulous middlemen, whose costs typically account for 60%-70% of the retail price of agricultural produce.
Sohu.com attacked the food security argument behind the existing policy, citing China’s reliance on imports for 60% of its oil needs which few believe has posed a serious threat to national security.
Opening up further to grain imports will force many people in rural areas, especially seniors and women, to give up farming, but the effect will actually be limited as many farms are operating in the red or generate only slim profits, according to the report, which said the vacated farmland could be used to cultivate crops with higher added value.
