Wednesday, November 17, 2010

Seven Good Grain Harvests

According to government statistics, China has had seven straight increases in grain production from 2003 to 2010. The Farmers Daily online interviewed three of China's leading agricultural economists to ask them to explain the reasons behind this unprecedented string of big harvests. Guess what? All three stressed that the policies of the communist party and the government were the key factors behind the big harvests.

Han Jun, a top rural policy advisor in the State Council's Development Research Center, said in his interview that China has gone through cycles in grain production over the past three decades, but the 7-straight increases are unprecendented. He calls this a "golden period" and says it is remarkable considering the challenges faced, including this year's bad weather, market volatility, and inflationary expectations.

Han says two-thirds of the increase in production came from rising yields and one-third came from increased grain area.

Ke Bingsheng, president of China Agricultural University, said in his interview that grain area increased by 10% from 2003 to 2009 and increased multiple-cropping account for two-thirds of that increase. Ke also points out that area of high-yielding crops increased--corn was up 30% and rice was up 12%, so a larger volume of output was obtained from a given area of land.

Han and Ke also credit increased production capacity. Han says that human labor, draft animals, and organic fertilizer were replaced by machinery and chemical fertilizer. High quality seeds are planted on 95% of cropland now. Irrigated area has increased.

Song Hongyuan, director of the Ministry of Agriculture's Research Center for Rural Economy, said in his interview that policy was the most fundamental reason for the increase in grain production. Al three economists credit subsidies for giving farmers stronger incentives to plant grain. Song emphasizes the consistency of the subsidies--farmers understood they could rely on the subsidies year in and year out.

Song and Han both emphasize price support policies. The government has a strategy of raising prices at a steady rate year by year, preventing big fluctuations. Song points out that China's grain prices have not fluctuated as much as other prices. Song asserts that price fluctuations are what farmers fear most; they need stability.

The seven-year run of big grain harvests reminds me of the Old Testament story of Joseph, who advised the Egyptian Pharoah on grain policy. Joseph interpreted Pharaoh's dream of seven skinny cows eating up seven fat ones as an omen that seven good harvests would be followed by seven bad harvests. Joseph advised Pharoah to store up grain (in the cities) during the good years and then let everyone come to him to buy it during the lean years.

China's Communist leaders would certainly admire Joseph as a wise advisor to a powerful king (the type of career Confucious aspired to, in fact, but never attained) and he developed the first "early warning system" for forecasting the grain market. Another eery parallel is that Joseph was languishing in prison on trumped-up charges when he was called in to be senior grain policy advisor.

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