Saturday, April 14, 2018

Food Security AND Quality Promised by China Grain Reserve

China's food security strategy will prioritize quality over pure volume of grain, according to the head of the country's new State Administration of Grain and Commodity Reserves. Authorities will vomit their huge store of sub-par grain reserves into the market, induce farmers to grow high-quality grains consumers want, create a network of labs to test the grains, build grain industry parks housing millers and traders who will profit from premium-priced products, and crack down on corrupt operators in the system.

The grain and commodity reserve administration created by China's recent government realignment was inaugurated April 4, 2018. It will be responsible for managing national strategic reserves of grain, cotton and sugar under the direction of the National Development and Reform Commission. The new bureau takes on responsibilities of the former State Administration of Grain, Ministries of Civil Affairs and Commerce, and National Energy Administration.

In a Peoples Daily interview Zhang Wufeng, the reserve bureau's director (previously communist party secretary of the State Administration of Grain that it replaces), gave assurances that the "food bowls of Chinese people must remain tightly in their own hands" but Zhang also prioritized accelerated disposal of excessive inventories of corn, rice and other commodities to reach "rational" levels as soon as possible.

Zhang observed conflicts arising from changes in Chinese society. On the production side, China has surpluses of some commodities (i.e. corn and rice, although he did not mention them) and deficits of others (soybeans, again not mentioned specifically). Zhang observed that Chinese consumers had transitioned from simply getting enough to eat to "eating well, eating healthy, eating with assurance, and eating with convenience," but he fretted that China lacks supplies of environmentally friendly and high quality foods.

Zhang promised to align the grain reserve system with market demand. He also said adjustment of China's crop mix and rotation of crops and land retirement are necessary. The reserve bureau has no responsibility for crop production, but he promised to scientifically set the minimum prices for wheat and rice, coordinate reserve procurement and sales, and pay more attention to the potential consumption (of what they procure?)

A "China quality grain project" (优质粮食工程) kicked off last October (by Zhang) is the grain reserve bureau's contribution to the national rural revitalization strategy, according to Zhang. This project aims to upgrade the quality of China's grain and edible oils by improving post-production services, establishing a national system of third-party grain-testing organizations, and revamping quality control guidelines for grains, flour, noodles, and edible oils by 2020. The Ministry of Finance allocated 5 billion yuan ($790 million) for the project in 2017. By implementing the "China good grain and oil action plan," Zhang promised to complete "the last kilometer" for quality grain and oils to reach the dining tables of each consumer’s family.

Zhang promised to transform China from a "big" grain-producing country to a "strong" grain-producing country by giving top attention to quality and creating value chains based on deriving profits from quality products. Model cities and counties, specialty industry parks, and leading backbone companies will be components of a modernized grain economy. Zhang pledged that food security will be maintained by coordinating "government and market, the current situation and long-term prospects, production regions and consuming regions, domestic and foreign, security and development."

Authorities will continue to intervene in markets through "macro control" using central government reserves as "ballast stones" and local reserves as "the first line of defense." Zhang promises to nurture state-owned enterprises--through mixed ownership--while supporting small and medium enterprises in the grain market. The reserve bureau will speed up development of a national electronic grain exchange platform and brokering grain trade between grain-producing provinces and grain-deficit provinces.

Finally, Zhang sends a message to corrupt granary operators by promising to demand grain "quality" and "honesty" from both government and industry through strict party governance, high standards for cadres, and concentrated action plans featuring "great investigation, quick correction, strict law enforcement" to root out "hidden risks." A hot line has been set up for the public to report malfeasance in the grain marketing and storage system.

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