Of Stablizing Domestic Grain Market

To avoid the grain price fluctuation generated by grain fluctuation in the domestic market, there should be a certain differentiation

Fig. 2.4. The future tendencies of three types of crops: grain crops, feed crops and cash crops.

Table 2-8.The contribution of science

and technology to yield

Years

Contribution

1972-1982

27%

1983-1990

35%

1990-1996

40%

between the domestic grain market and the international market. Grain import and export should still be managed by the state-run grain industries. The national grain reserves can participate in the international grain trade to some extent. When the grain price rises rapidly in the international market, the central government can then sell a certain amount of the grain reserves to the grain business sectors for export, in order to relieve the impact of rising international prices on the domestc market. When the grain price in the international market is much lower than that in the domestic market, the central government can purchase some of the imported grains as national grain reserves.

An appropriate amount of the imported grains can be used to compensate the domes tic grain shortages. When there is a grain shortage caused by the lower grain price in the domestic market compared to the international market, the grain importerts should be subsidized with the surplus, "the grain price in the intertnational market + tariff - the grain price in the domestic market," apart from enjoying tariff preferences. When the grain price in the domestic market is higher than that in the international market, a target price should be set, to raise the grain purchasing price. Theoretically, the volume of grain needed to fulfill the target price should be the basis of the grain imports.

Surplus grains are exported when the grain price in the domestic market is lower than that in the international market. Grain exports undoubtedly raise the grain price in the domestic market, which benefits grain producers. It will not result in raising the grain price in the market. Grain exports will also decrease the volume of grain purchased by the central government at target price and therefore lighten the financial burden of subsidies. However, one consequence should be avoided, which is that the excess exports should cause grain shortages in the domestic market.

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