By Cheng Guoqiang & Zhu Mande, Research Team on “Policy Reform of Minimum Grain Purchase Prices in China”,

Research report No.108, 2017 (Total 5183) 2017-9-1

Abstract: China has now all the right conditions to conduct reform of the minimum grain purchase prices. This paper suggests that efforts should be made to promote policy reform of minimum grain purchase prices by means of purchasing grain at minimum purchase prices in order to prevent grain prices from further dropping and separating pricing from subsidies and the reform should be based on the guideline of stabilizing structure, enhancing flexibility and reforming mechanism. The reform needs to be focused on the following measures. First, we need to merge rice varieties and the future pricing will be only one price for rice instead of the past different prices set respectively for early indica rice, middle-season and late indica rice and japonica rice. Second, we need to set reasonable minimum purchase price and give full play to the role of market mechanism. Third, we need to establish a compensation mechanism to modestly compensate for the loss of basic income of grain farmers. Fourth, we need to innovate grain purchase and storage mechanism, and let the rotation of grain reserves play its role in supporting and regulating market performance. At the same time, we need to enforce local governments’ supervision responsibility on policy-related grain purchase and storage, increase the amount of special grain reserves, enhance destocking of grain, further advance the adjustment of agricultural structure, strengthen control of grain import, speed up the establishment of basic information system of rural households and vigorously develop the economy of grain industry.

Key words: grain, floor prices, reform, minimum purchase prices, the separation of pricing from subsidies