Ensuring Staple Stability

“Everything was flooded overnight,” Zhang said as he looked at the wasted remnants of his labor. Anhui is one of the 13 main grain-producing areas for both wheat and rice in China. Before the summer harvest, floods swept the province in August. Zhang told the reporter that he did not have insurance, so in addition to losing all the grain, he would not be compensated for the 30,000 yuan (US$4,395) he had spent on his crops this year. His experience is the tip of the iceberg for farmers in flood-ravaged Anhui. 　

“This year we’ve had to fight massive flooding caused by severe rainfall. For thousands of years, all we could do to alleviate such natural disasters is try our best to reduce the losses,” Chang Wei, a professor at Anhui University’s China Agriculture Research Center, told NewsChina. 　

Food security is a chronic issue in China. The situation is made worse this year due to the ongoing Covid-19 pandemic. A July report titled “Early Warning Analysis of Acute Food Insecurity Hotspots” by the UN Food and Agriculture Organization and the World Food Program highlights 25 countries at risk of significant food security deterioration, and particularly acute hunger and associated malnutrition. In order to secure domestic supply, since the outbreak of the pandemic, Russia, Vietnam, Egypt, India and other countries have restricted or even stopped food exports, which has impacted the global food supply chain. Countries that depend heavily on food imports are in a challenging situation.　

This has raised concerns about China’s food security among the public. Zhang Xiaoshan, an expert on agriculture, rural areas and farmers and a member of the Chinese Academy of Social Sciences (CASS), told NewsChina that China has achieved basic self-sufficiency in grain and absolute safety in food provision, but in the long run, China’s grain production and consumption will be tightly balanced, and the country should still prepare for possible food security challenges.　

The China Agricultural Industry Development Report 2020 states that China was 98.75 percent self-sufficient in the three main staples of rice, wheat and corn in 2019, and there was no import dependence. Many experts NewsChina interviewed said that China’s food security depends on its sufficient food stockpiles. The national stockpile of rice, wheat and corn in 2019 was 280 million tons, with record highs of rice and wheat stored. This can meet national demand for over a year, said a source at the State Food and Materials Reserve. 　

Cao Baoming, dean of the Food Economics Research Institute of Nanjing University of Finance and Economics, believes that China’s domestic grain reserves are sufficient for at least three years.　

According to MARA and the General Administration of Customs (GAC), annual rice consumption in China is about 197 million tons in 2019 through 2020, and the annual output of rice in China is about 199 million tons. Annual consumption of wheat is about 112 million tons and annual output is about 118 million tons.　

In recent years, production of rice, corn and wheat has exceeded demand, while demand for soybean and canola depended mostly on imports. “There is too much production of overstocked grains, which consumes a lot of funds, and there is not enough production of soybean and canola, which requires a lot of imports from foreign countries,” Chen Youquan, deputy director of the Plant Management Department of the Ministry of Agriculture and Rural Affairs, who believes this situation is one of the prominent issues affecting national food security. 　

China’s grain stockpiles are divided into reserve stocks and commodity stockpiles. There are central and local reserves. In 2008, China established a grain reserve system dominated by central reserves, supported by provincial reserves with contributions from city, county and enterprise-level reserves. 　

NewsChina learned that grain reserves in Shanghai, Yunnan and other provinces and cities have hit record highs this year. Overstocks of grain are also a burden. Zhong Yu, director of the Industrial Economics Research Office of the Institute of Agricultural Economics and Development of the Chinese Academy of Agricultural Sciences, told NewsChina that on research trips to grain reserves in Henan and Hubei provinces in March and April 2019, he observed problems of overstocked grain and prolonged storage time. Zhong said this means the reserves held in these provinces are worthless. 　

Cao Baoming, dean of the Institute of Food Economics at Nanjing University of Finance and Economics, believes that the high grain stocks are a financial burden and are causing a decline in quality and value. At the national level, the storage life of different grains is clearly stipulated. To the south of the Yangtze River, rice can be stored for two to three years, and corn and legumes for one to two years. North of the Yangtze, rice and corn can be stored for two to three years, and legumes for one to two years. Zhang Xiaoshan from CASS believes that grain storage is challenging, and overstocking grain is a waste of resources. Further substantial increases in food stocks are an unsustainable burden in terms of financial and stock facilities.　

Statistics from the Qishengyuan Agriculture Biology Science Company in Jiangxi Province show that it costs 760 yuan (US$112) to grow one mu (666.7 square meters) of rice. This includes the seedlings, plowing, pesticides and fertilizers, harvesting and other expenses. According to the market price for rice, a farmer can earn 1,350 yuan (US$200) per mu, leaving a profit of just 590 yuan (US$87). 　

Han Fuling, a professor at the School of Finance of the Central University of Finance and Economics, posted on his Weibo account the income from planting one mu of wheat in Xinzhuang Village, Wen’an County, Hebei Province as 243 yuan (US$36). It is not known how much land each farmer has on average. 　

According to statistics released by Tianfeng Securities Research Institute in 2016, China was the world’s top agricultural producer, but per capita agricultural added value was the second-lowest. Compared with the US, production costs for staple crops such as rice, wheat, corn, soybeans and cotton are higher in China. In particular, it costs three times as much to produce wheat in China as in the US. 　

Mao Xuefeng, a professor at the School of Agriculture and Rural Development at the Renmin University of China, told NewsChina that rising land and labor costs are key factors driving food production costs in China. In the past decade, the cost per unit of food production has risen significantly higher than in the US and Brazil, and the cost difference has gradually widened. Labor and land costs are high and limited mechanization is a central issue. 　

Starting in 2004, China rolled out a series of agricultural subsidies for seeds and agricultural machinery, tools and other materials to boost incomes and production. In 2016, China implemented a “three subsidies” policy reform for agriculture, combining the previous direct grain supplement, comprehensive agricultural subsidies and subsidies for improved crop varieties into cultivated land protection subsidies.　

In reality, the three subsidies policy is not very attractive to farmers, and many middle-aged and young people are unwilling to work the land. Dang Guoying, a researcher at the Institute of Rural Development at CASS, told NewsChina that China’s agricultural subsidy policy needs revision. In his view, while it would be less cost-effective for farmers to farm their land without subsidies, these could be reduced if there was a shift in focus toward reducing the cost of farming. Dang’s research found that the price of imported grain from the US is 30 percent cheaper than domestic grain. If the price of domestic grain were 30 percent lower, most Chinese farmers would choose not to farm anymore. “We must consolidate farms to lower costs and promote modern agriculture,” Dang said.　

To tackle the high cost of grain farming, China established a minimum purchase price policy in 2004. In the previous decade, China had implemented a 10-year protected price acquisition policy. Their aim was to promote grain price marketization. But these policies did not work as hoped. 　

Zhang Xiaoshan said that the policy of a minimum purchase price and a temporary storage price does not fluctuate with the changing cost of grain planting, thus distorting the market. The purchase price of grain increases annually, which deviated from the market law and results in the phenomenon of storing domestic grain and selling imported grain. 　

Mao Xuefeng believes that the minimum grain purchase price policy led to the expansion of the price differential at home and abroad, causing a series of problems, and it forced the country to promote price reform. In 2017, China embarked on deepening supply-side structural reform of grain, indicating the purchase price for rice and wheat stock would be decided by the market. 

　

“Separation of price-setting and subsidies is the direction for market reform of grain production,” Zhang Xiaoshan said. “The market should decide prices.”　

“When considering food security, we have paid too much attention to stockpiles. In fact, food security is a systemic issue, and from a long-term perspective, related to food-producing capacity rather than mere stockpiles,” Chen Ming, an executive researcher at the Institute of Political Science at CASS, wrote in an article published in The Beijing News in April, which emphasized securing farmland and incentives for farmers is more important than stockpiling grain. 　

However, protecting farmland is not easy due to non-agricultural issues, as well as problems arising from poor agricultural practice. A major problem is the continued reduction in cultivated land area. Official statistics quoted by the Global Times in 2010 showed that arable land decreased from 1.92 billion mu (128 million hectares) in 2000 to 1.827 billion mu (121.8 million hectares) in 2006. The situation continued to worsen in the following years. During an interview with NewsChina, Chen Xiwen, former director of the office of the central leading group on rural work, said the amount of arable land decreased by 125 million mu (8.3 million hectares) in the 11 years before 2008. The latest issue of China’s Land, Mineral and Marine Resources Statistics Bulletin released by the Ministry of Natural Resources in 2017, shows that national cultivated land area was around 2 billion mu (134.9 million hectares) at the end of 2017, with a net reduction of about 910,000 mu (60,667 hectares) of cultivated land in the year.　

On January 19, the Ministry of Natural Resources (MNR) reported the results of an inspection conducted in 2019 among 28 provincial regions for land resource protection. The MNR found the total amount of land used illegally for construction was 1.14 million mu (76,000 hectares).　

Besides the reduction in cultivated land, intensive farming and soil pollution have resulted in a decline in cultivated land quality. 　

Many experts told NewsChina that the main challenge for China’s farmland protection is the rapid expansion of urbanization and extensive waste of land. In a paper published in the Proceedings of the Chinese Academy of Sciences in April this year, statistics showed that for each 1 percent increase in urbanization in China, the area of cultivated land reduces about 2 million mu (133,333 hectares). By 2030, the projected level of urbanization of about 70 percent will mean the loss of 20 million mu (1.3 million hectares) of cultivated land, much of it high-quality land with high productivity.　

Under rapid urbanization, another threat to food security is that many farmers moved to work in cities, which exacerbates the shortage of rural labor and affects grain production. For example, in many places in Hunan and Jiangxi provinces, due to lack of labor, farmers plant rice once a year instead of twice. 　

Cheng Guoqiang, former secretary-general of the Academic Council of the Development Research Centre of the State Council and an expert with the Ministry of Agriculture and Rural Affairs, told the reporter that more Chinese grain enterprises should be encouraged to seek overseas opportunities and cooperate in agricultural production with other countries rich in agricultural resources. Through setting up an intact supply chain of storage, logistics and reliable trading partners with those countries, China can rid itself of its dependence on traditional agricultural exporting powers and be resilient toward trade risks in the long term.