Agricultural products affect the livelihoods of many people. The government should keep speculators away from farm products to protect the interests of farmers and consumers both.

Li Changping :Farmers must have larger say in market

Prices of several non-staple farm products have increased drastically. It is important to find the reason for such a sharp increase to cope with the resultant problems.

I think the rapid rise in prices reflects the drawbacks in the distribution system and market mechanism. The sharp increase in the prices of some farm products does not necessarily mean that other farm products are being sold at reasonable prices. In fact, some are even undervalued.

To some extent, the rise in prices is an irreversible trend. The costs of production and labor have been increasing for years. Compared to that, the prices of farm products were low for a long time. Such situations harm farmers who put in their labor, money and time to produce them. That's why the government should establish a mechanism to ensure that farm product prices keep increasing, albeit in line with the movements in the market.

But such an arrangement will hurt low-income households. They are the most vulnerable group of society not only because of their low incomes, but also because of the lack of necessary social security. This problem can be solved if the government takes measures to reform the income distribution system and improve the social welfare system.

Speculation in farm products, which leads to price rises, is not as complicated as that in the real estate sector. The middlemen can easily drive up the prices of farm products because they play the key role in fixing prices. And they do so because rural producers' and urban consumers' cooperatives cannot play their true roles for lack of a proper mechanism. The result: Farmers get much less than they deserve and consumers pay much more than they should.

As is evident, the greatest beneficiaries of the current increase in prices of farm products have been the middlemen. They buy the products and hoard them to artificially raise their prices.

A sharp rise in the prices of farm products is generally followed by a fall. In such cases, it is again the producers that suffer the most, because the middlemen use the falling prices to pay them even less.

Given such a situation, it is imperative for the government to take measures to let real demand and supply determine the prices of farm products. The government should also build a sound distribution system for farm products and strengthen market supervision. These steps are necessary to prevent farmers and consumers from suffering at the hands of the middlemen.

Besides, it is important for the government to take two more measures. First, to prevent an artificial increase in the prices of farm products, it should improve the production of farm products instead of only combating speculators.

China has to achieve self-sufficiency in major farm products and grant farmers more powers to play a greater role in the market, especially in fixing prices. This will be possible only if the government sets up efficient producers' cooperatives and helps rural collective economic organizations build "food banks" and modern warehouses.

Moreover, the government has to establish a system that will make it possible for farmers to establish regional production associations to enjoy a greater say in the market.

To ensure that the distribution system functions properly, the government should help set up rural producers' and urban consumers' cooperatives and guide them to build a production and sales alliance, and improve the State purchase system.

Governments at all levels should control the key elements of agricultural products' logistics. The chance to purchase and store farm products should first be given rural producers' cooperative and key State enterprises, rather than private and foreign enterprises.

Second, to ensure fair competition in the farm sector and prioritize food security, the government should help private capital to "go global" and prevent it from engaging in speculation in the domestic market. As far as trade goes, the government has to pass a regulations to make it mandatory for foreign companies doing business in farm products to cooperate with producers' cooperative to ensure prices do not skyrocket without a valid reason.

The author is a professor at the Rural Development and Construction Research Center, Hebei University. The article was first published in Banyuetan magazine.