Study On The Effect Of Corn "Price-subsidy Separation" Policy In China

As the most-planted food crop in China,corn plays an important role in food security strategy.In 2008,the state implemented the temporary corn storage policy in three provinces in Northeast China(Heilongjiang,Jilin and Liaoning)and four cities in Inner Mongolia Autonomous Region.Although the policy achieved its two main goals of increasing grain production and farmers' income,it generated some side effects,such as biased planting structure,slow-down of development of downstream industry,loss of competitiveness of domestic corn market,monopsony problems,etc.The basic reason is that the state-made price of corn increased year by year during the implementation of temporary storage policy,which distorts the domestic corn market.The situation of high output,high stock and high imports of grain entails the reform of mechanism of corn price making.Therefore,in 2016,the state implemented the policy of " Price-Subsidy Separation" in three provinces in Northeast China and four cities in Inner Mongolia Autonomous Region.Under the new policy,corn price is determined by the market conditions.If the market-based price doesn't reach the reservation price,the state compensates for the gap between the market-based price and the reservation price in order to ensure the stability of the grain production and farmers' income in the corn producing areas.Up to now,the "Price-subsidy Separation" policy of corn has been implemented for a complete cycle(2016-2018).How effective is the policy? Under the guidance of cobweb theory,supply and demand theory,farmer behavior theory,comparative advantage theory and price transmission theory,this paper systematically analyzes the effects on the income and the grain production restructure,as well as the effects on the collection,storage(circulation)and downstream industries(consumption).Therefore,this paper provides a scientific insight and understanding of the internal mechanism of different policy alternatives.This paper adds new empirical evidence to the empirical research on the reform of corn harvesting and storage policy,which could be informative for improving corn harvesting and storage policy and promoting the development of corn industry.The empirical evidence in this paper could also serve as empirical support for the subsequent reform of rice,wheat and other grain harvesting and storage policy.The main research topics are summarized as follows:Research Topic 1: Income Effect of the Corn "Price-subsidy Separation" PolicyThis paper employs differences-in-differences(DID)approach to analyze the effect of corn "Price-subsidy Separation" policy on farmers' income.This approach relies on the micro survey data from Heilongjiang Province,Jilin,Liaoning Province,which are influenced by the policy and are treated areas in our framework,and Shandong Province,Henan Province,which are not influenced and serve as control areas in our framework.The results show that the policy raises the per capita corn sales in the treated areas,but reduces the per capita income of farmers,indicating that the policy ensures the farmers' corn sales at the costs of a delayed reallocation of labor into other lucrative economic activities.Furthermore,this paper analyze the dynamic effects of the policy and find that the effect of the policy is the more prominent in the first year after the implementation of the policy than that in the second year and the third year.Research Topic 2: The Effect of the Corn "Price-subsidy Separation" Policy on the Grain Production Restructure.This topic uses the macro data and micro survey data from Heilongjiang Province,Jilin Province,Liaoning Province and four cities in Inner Mongolia Autonomous Region,which are influenced by the policy and are treated areas in our framework,and Hebei Province,Henan Province,Shanxi Province,Shandong Province and so on,which are not influenced and serve as control areas in our framework to analyze the effect of the policy on the grain production restructure.The results of both the macro and micro analysis show that the corn areas decline after the implementation of the policy,indicating that the policy leads to the reallocation of cultivated land resources,thus reaching the goals of restructuring grain production.Further analysis shows that the effect of planting restructure is more significant in the second year of the implementation of the policy.Although the corn production picked up in 2018,the overall trend of corn planting area is declining.The unscientific and inaccurate standard of subsidy offering of the policy is to be blamed for the rebound in corn areas.Finally,based on the theory of comparative advantage,this paper uses the data from a representative province,which is Jilin Province,to analyze the situation of planting restructure of major and minor production areas.It is found that the policy has less inhibitory effect on the corn planting in the major areas,and the minor dominant areas are more sensitive to the policy response.Research Topic 3: The Effect of the Corn "Price-subsidy Separation" Policy on the Collection and Storage of CornThis paper analyzes the effect of the policy on the collection and storage of corn.First,this paper analyzes some cases to study the influences of the change in the acquirer's operation mode and behavior on the market structure after the corn collection and storage policy reform.Secondly,relying on the field survey data,this paper investigates the changes in farmers' sales.The results show that the monopsony power of the state-owned grain storage enterprises is weakened.At the same time,the policy has activated the purchasing enthusiasm of processing enterprises and cooperatives.The broker's market share declined a little due to other acquirers swarming into the market.The increase in the entities purchasing the corn promotes the circulation of corn and relieves the pressure of inventory.However,years are still ahead of the market restructure.Research Topic 4: The Effect of the Corn "Price-subsidy Separation" Policy on the Production Cost of the Downstream Industry.This paper takes corn processing industry and animal husbandry as example,to analyzes the effect on the production cost of the downstream industry of the policy.Seven corn processing enterprises,including four starch producing enterprises and three alcohol producing enterprises,were selected for the analysis of the effect of on the costs of corn processing industry before and after the implementation of the policy.The results show that after the implementation of the policy,the corn-processing industry reached the break-even point and showed the potential for profit growth.However,there are still some problems such as the inadequate deep processing and the low profit of primary processing products.In order to expand the profit space of processing enterprises,new policies should focus on the reduction in the production cost and technology upgrade.This paper also analyzes the effect on the animal husbandry.First of all,the results show that the animal husbandry also reached the break-even point at current price.Secondly,this paper analyzes the cost pass-through through the supply chain,replying on the data on corn price,pig feed price and the average monthly price of live pig in Heilongjiang,Jilin and Liaoning provinces.The results show that there are long-term correlation and short-term dynamic relationships between corn price,pig feed price and live pig price in the supply chain system.This paper runs the Granger causality test and finds that there is a mutual Granger causality between corn price,pig feed price and pig price.This paper further uses impulse response function and runs variance decomposition and the results show that corn price,pig feed price and live pig price have pass-through effect on one another,but the extent of the effects varies.The influence of corn price on pig feed price is greater than that of pig feed price on corn price;the influence of corn price on live pig price is greater than that of the price of pigs on the price of corn;the effect of the price of pig feed on the price of pigs is greater than that of corn.Using the finite distribution lag model to analyze the transmission intensity in the price system of the supply chain,the results show that the immediate effect of corn price on the price of pigs is less than the dynamic effect,and the immediate effect of pig feed price on the price of pigs is greater than the dynamic effect.