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Strike a Balance between Cutting Food Inventory and Stabilizing Production Capacity (No.95, 2018)


By Wu Zhenjun, Zhou Liqun & Ye Xingqing, Research Department of Rural Economy, DRC

Research Report, No.95, 2018 (Total 5370) 2018-6-8

Abstract: This round of grain inventory increase has three salient characteristics. First, the domestic and foreign prices are inverted, and the high grain price at home has enabled grain import to grab a lion’s share in domestic market, leading to the increase of domestic grain inventory. Second, the rapid increase in the temporary purchasing and storage price of corn has resulted in the total increase of the yield, import and inventory of corn. Third, the sluggish growth of intensive grain processing industry has affected the growth of grain processing demand. In the past two years, a series of measures to cut grain inventory, especially corn stockpiles, have played an important role in curbing the rapid increase of stocked grains. The production of corn has become insufficient to meet the demand and the inventory volume has declined. Looking forward to the future, we should strike a balance between grain destocking in the short run and maintaining the food production capacity in the long run. Destocking should focus on expanding industrial consumption, regulating import performance and orderly quitting marginal production capacity without hurting the healthy production capacity of grain. Stabilizing production capacity should focus on deepening the construction of high standard basic farmland, strengthening the agricultural science and technology reserves and establishing a mechanism to guarantee the income of crop producers without increasing the current production.

Key words: food inventory, food production capacity, policy options