China’s Grain Farming Sector is on an Unsustainable Path: IFPRI

If China is to build a sustainable farming sector, it must shift away from rigid self-sufficiency and paying highly subsidized grain prices to its domestic producers, according to the Washington-based think tank, International Food Policy Research Institute (IFPRI).

Under national policy, China, the world’s number one producer of wheat and rice, and the number two producer of corn, buys grain from domestic producers at prices that are much higher than market prices with the goal of building up stocks to ensure self-sufficiency in key grains and to support the nation’s farmers. This practice however, has led to overflowing inventories or surplus grain estimated to equal more than 80% of the country’s annual consumption, and has placed a large financial burden upon the country’s economy and infrastructure.

"China is in a trap right now. On the one hand, it purchases agricultural products from farmers at a very high price, but in meantime it cannot sell to the market [at such high prices] so all the purchases go into stocks, and that's very costly,” says IFPRI director general, Fan Shenggen in an interview with Business Insider.

China has forgone this stockpiling policy in regard to soybeans and cotton, instead giving farmers direct subsidies based on their output, but IFPRI states that this system is unsustainable as well; advising Beijing to gradually shift away from subsidies altogether, to offer income support and assistance to farmers to either expand their scale or exit the industry.

High level policy makers in China seem to be listening, as there is a growing understanding that the country’s farm policy needs to change. This change in mindset away from a rigid insistence upon self-sufficiency in all grains is set to be integrated in the country’s newest five-year plan for 2016-2020 currently being drafted.