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Farm price targets 'will stabilize domestic market'

Updated: 2014-02-11 07:17
By Zhong Nan ( China Daily)

Hu Zengmin, an analyst at the China National Grain and Oils Information Center in Harbin, said the domestic prices of many farm products are higher than world prices. That's helping drive imports.

China introduced floor prices for farm products in 2006 to protect farmers from price volatility. The government buys such products as wheat, corn and cotton for State reserves when market prices fall below floor prices.

Farm product prices in the United States and European Union are more market-driven, partly because of supply-demand relationships and the function of commodity markets such as the Chicago Board of Trade.

China still relies on stockpiling and floor purchase prices, supported by government subsidies, to regulate prices.

But the nation's minimum grain purchase prices have remained above world levels in the past three years, which prompted more imports of products such as soybeans, corn and cotton from the US, Argentina and India in 2013.

The price gaps "have made it difficult for domestic buyers to improve sales and are also driving up China's import volumes", Hu said.

"Although there is no shortage of staple grains in China, policymakers should consider letting the minimum purchase prices of domestic crops fall, bringing them more in line with international prices," said Zheng Fengtian, a professor at the school of agricultural economics and rural development at the Beijing-based Renmin University of China.

"To obtain greater advantages from the international market, increasing imports of non-staple grains and related products - such as soybeans, feed, meat, edible oil and deep-processed grain - will allow China to concentrate on the production of rice, wheat and corn to further ensure its grain security," said Zheng.

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