Comprehensively Promote Agriculture Risk Management. Boost Stable and Sound Development of Agriculture. Distinguished guests, ladies and gentlemen:

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1 Comprehensively Promote Agriculture Risk Management Boost Stable and Sound Development of Agriculture Qingcai Yang, Former Vice Governor of Jilin Province, CHINA, Executive Director, China Agriculture Risk Association, CHINA Distinguished guests, ladies and gentlemen: I m honored here to take part in the International Forum of Agriculture Risk, Finance and Insurance as the representative of China Agriculture Risk Management Association. And I m also grateful for the organizers of the forum for providing such an opportunity for us to make exchanges with all of you on the related topics of agriculture risk management. The meeting gathered a good number of renowned experts and scholars, leading politicians, elites of the industry etc. I believe, with the meticulous organization of the organizers and everybody s active participation, the forum will surely exert active promotion on the development of agriculture risk management, finance and insurance. Global agriculture risk management is taking the trend of further enhancement; and agriculture risk management has irreplaceable effects on the maintenance and guarantee of agriculture production, food security and farmer s rights. The Chinese

2 government engages together with the rest of the world in the researching and exploring of agriculture risk management. China is a great agricultural country and a developing country. Building modern agriculture and market system and the great challenge of combating climate change cannot avoid the major topic of agriculture risk management which draws the attention of many aspects. We are very pleased to see that in the long river of history of Chinese agriculture industry development, in the development process of agriculture risk system management with more and more importance, there emerged such a picture, which is an illustration of how closely the development of Chinese agriculture risk management and agriculture insurance are related with international stage. Today, I d like to share with you the situation of three aspects. 1. From the global view, agriculture risk management faces new circumstances, new task and new requirements 2. Under new situation of thorough and correct understanding, the strategic function of agriculture risk management and insurance 3. Several pieces of advice on international cooperation and exchange on enhancing agriculture risk management and agriculture insurance. 1. From the global view, agriculture risk management faces new

3 circumstances, new task and new requirements (1) climate change and frequent disasters The biggest risk of agriculture is natural risks. With the anomalous changes of global climate, meteorological disasters and extreme weathers are becoming more frequent year by year. The biggest risk of agriculture is natural risks. With the anomalous changes of global climate, meteorological disasters and extreme weathers are becoming more frequent year by year. In 2007, the UK suffered rainstorm that happens only every 200 years; in 2010, Pakistan suffered from heavy flood of the century and Russian was stricken by great drought; in 2011, the US tornado caused hundreds of death. According to statistics, in recent 10 years, the earth had economic losses reaching 50 billion US dollars each year due to meteorological or climatic disasters, causing 22,000 deaths. With the negative influence brought by global climate change, the food security, water resource and energy conservation etc. will all facing bigger challenges is a special year that every Chinese recalls clearly. That year witnessed the disasters of heaviest drought in southwest China, spring rainstorm in the south, snow-melting flood in Xinjiang, indica rice twice-migration pests and 3rd generation

4 armyworm plague, the raging of typhoon Haikui which lasts the longest and with the highest strength, the striking of typhoon Bolaven mostly affected in the inland of north China. The extreme weather events happened a lot in that year. With rainstorm, flood, typhoon and drought inter-woven together, it has the features of multiple concurrencies, wide affecting range, high damaging effects and repetitiveness in some areas, which caused a severe loss. With the speedy development of economy and society and the increasing of population, the total numbers of people and total amount affected by these disasters have all largely increased. Therefore, the sensitive area of disasters and fragile industries become more. Meteorological hazards have constituted greater threat on the economic building, ecosystem building and people s life and property safety. Under this condition, the risks faced by agriculture are bigger; the task of agriculture risk management is also heavier. (2) The application of modern agricultural science and technology The development of modern agriculture, application of agricultural science and technology, bring the agriculture a revolutionary change, regional, intensive and mechanized production mode is gradually substituting the traditional

5 household planting method, and greatly improving the efficiency of agricultural production. The application of modern science and technology has changed the organic structure of agricultural input costs, agricultural external costs such as material and service cost are growing quickly, labor costs proportion in the total cost has declined, the phenomenon of land circulation is increasing, which increases the proportion of land cost. According to statistics: the annual increasing speed of average cost per mu for material and service for the three major grain crop is 6.4%, stably over 50% of total cost; in recent 10 years, land cost yearly increasing speed is 8.1%, the weight increased from 9% 10 years ago to 17% now; whereas labor cost has decreased from 40% 10 years ago to 32% now. The increasing of labor cost increased agriculture risk loss and the losses faced by agriculture risk management people also increased and the marginal space is squeezed. So, modern agriculture requires enhancing risk management in order to secure the income of operators, and also posing higher requirements on the level of agriculture risk management people. (3)The development of agriculture industralization The effects of agriculture industrialization on modern

6 agriculture show in many fields, many species and many levels, and also the effects show a multi-functional trend, including planting, breeding, animal husbandry, tourism agriculture and other categories, agricultural connotation is is extending, agricultural extension is expanding. Agriculture does not possess only a single industrial function. With the development of the regional layout of advantageous agricultural products, agriculture industry is grouping and developing continuously, and an advantageous industry belt which has prominent advantage, reasonable layout and coordinated development was formed. Second.Understand the new situation the fully and correctly, agriculture risk management and the strategic function of agriculture insurance. In China, rice, wheat, corn, soybean, the four major grain crops form 14 industrial belts, production concentration reach 98%, 88%, 99% and 81% respectively. 13 major grain-producing provinces grain output accounts for about 75.4% of the nationwide output thus drive all kinds of agriculture industrialization organization and agriculture enterprises. On 2012, all kinds of scale of production base that driven by Chinese agriculture industrialization organization accounted for more than 60% of the total scale of nationwide agriculture production, sales income of corporate champion

7 amounts to 5700 billion RMB,it has become an important subject of agriculture production input and agriculture product market supply. The vigorous development of the agriculture industrialization is expanding the scope of agriculture business scope and agriculture industrial structure. Development of risk management should move toward the direction of multi-level, multi-field. Therefore, the agricultural risk managers need to expand the risk security types and protection scope, to adapt to the new requirements and new tasks of the development of agriculture industrialization 2. Realizing the agriculture risk management and agriculture insurance s strategic function (1)It is an effective policy measure to protect the agriculture economy Agriculture is the foundation of national economy, for any country agriculture economy must be the starting point of industry economy and other economy. Developed countries such as the United States, Canada, France s large-scale development of modern agriculture has gone through more than a century, vigorously promote the agriculture industralization and the development of mechanization through the organic combination of market, system and technology, turn traditional agriculture

8 into modern agriculture, agriculture modernization greatly drive the development of the overall economy. China as the representative of the developing countries, strong national strength and the rapid development of the national economy in a certain extent due to the steady development of agriculture economy, especially a series of achievements that gained after the reform and opening up are eye-catching;it can be said that the agriculture economy in the entire national economy system and even the global economic system plays a more and more important role, So the countries in the world are issuing various types of measures that protect agriculture economy, among which the most important category is to do agriculture risk management well, to develop agriculture insurance vigorously. In the past period of time, the countries in the world mainly adopt the forms of financial assistance and emergency loans to deal with agriculture risk But these forms are very difficult to solve the problem of funds for reproduction of the affected farmers, we lack early warning mechanism, easy to cause the fiscal fund and bank funding difficulties, increasing financial pressure,which is easy to cause the scheduling problem for financial fund and bank fund, thus increasing financial pressure. It is not conducive to macro-control, and not

9 conducive to ensure the steady development of agriculture and the steady increase of the farmers income, But the financial rescue lacks the risk sharing and benefit sharing mechanism, which will increase the dependence, reduce the efficiency of fund usage. In sharp contrast is the advantage of agriculture insurance, agriculture insurance will be conducive to enhancing the risk resistance ability of farmers, stabilize and consolidate the position of agriculture as the foundation, it is conducive to the reform of agriculture subsidies method and relief method, improve financing ability of agriculture management main body, disaster prevention and mitigation mechanisms to establish new market, establish market-orientated new disaster prevention and mitigation mechanism. Especially in the rules of the world trade organization, developing agriculture insurance and promoting the sustainable development of agriculture is in full accord with the green box policy. So like other countries in the world, the Chinese government attaches great importance to the problem of agriculture risks management, and issued a series of policies and measures for agriculture risk management and agriculture insurance. Such as the establishment of agricultural risk prevention mechanism, Strengthen the construction of natural disasters and major animal and plant diseases and insect pests

10 forecasting and early warning emergency system, to develop agriculture insurance positively, and establish agriculture insurance system, to improve the agriculture insurance operation mechanism and development mode, gradually expand the agriculture insurance market scale, to promote the establishment of catastrophe risk dispersion mechanism which is supported by the government financially, perfect agriculture reinsurance system, gradually form the agriculture catastrophe risk transfer and share mechanism. (2) serving as important means of ensuring food security Agricultural risk management and agricultural insurance is related to global food security, it is not only a problem of risk aversion, but also related to global food security. There are currently nearly 7 billion people worldwide, the global food supply and demand is in a tight balance, if agricultural industry and interests of the agricultural operators are not well protected, once the food production reduce significantly, a new global food crisis will occur. FAO estimated that in 2050 global food production must increase by 60% to be able to meet the people's growing demand for food. So that countries should consider the agricultural risk management from the perspective of food security. Overall, agricultural risk management and agricultural

11 insurance s roles in protecting food security are mainly reflected in three aspects: First, facing the climate change, weather events, natural disasters, water scarcity, degradation of natural resources and the lack of infrastructure and other challenges, agriculture producers are still very fragile, to ensure the adequate agricultural production, the in-depth understanding of agricultural risks can help agricultural producers manage risks; Second, the risk diversification and security role of agricultural insurance can promote the invest in agricultural production from other industries, increase the agricultural operator s incentives to increase food production. Insurance can also promote the development of transport networks, distribution channels, warehouses and other logistics facilities, making more efficient distribution of food; Third, agricultural insurance can provide agricultural producers a full range of financial services to reduce the risk of accidents in their lives and help them in finance to develop production. (3) Serving as an effective way to maintain the safety of agricultural industry Agricultural risk management is a priority of the safety production of agriculture, only by strengthening the risk management, we can protect the interest of the agriculture

12 operator and protect the healthy development of agricultural industrialization. From the year of 2007, China's agricultural insurance industry enter into the rapid development stage, premium volume increased from 5.18 billion yuan to billion yuan in 2012, ranking first in Asia and second in the world, paying 113 million famers the claim payment up 55.1billion for the six year. Especially the year of 2012, Chinese agricultural insurance cover 970 million MU s crops, accounting for 40.2% of sown area in the whole country, assuming the risks amounting to billion yuan, paying 14.8 billion yuan to million farmer, and the average compensation is 526 yuan. Chinese agriculture insurance gave strong support for the reproduction after the agricultural disaster and became important source of funding for farmers to resume production and post-disaster reconstruction after the disaster. Agricultural insurance has played a positive role in promoting agricultural income and solving farmer s problem of "disaster caused the poverty ". The Combination of agricultural insurance and rural credit improved the rural credit environment, effectively activated the rural financial services chain, promoted the support by credit for agricultural industry, improved farmers' enthusiasm for growing

13 grain, ensured the stability of agricultural production. As continuous development of agricultural risk management and agricultural insurance, we can disperse sufficiently market risk, macroeconomic policies risk, contractual risk other than natural risks to ensure the interest of farmers, enterprises, governments and other participants and ensure the health and sustainable development of agricultural industry. 3. Suggestions on strengthening the international cooperation and exchange on agricultural risk management and agricultural insurance. The first suggestion is that all agricultural country should pay attention to agriculture risk management; governments at all levels should not only attach great importance to agriculture risk management, but also to enhance support and allocate appropriate financial subsidies. The second suggestion is to promote the innovative products of agricultural insurance, and exchange and share the innovative achievements between countries. The third suggestion is to put the safeguard of the interests of agricultural operators as the primary task on agricultural insurance, and agricultural risk management. The Fourth suggestion is to establish and improve mechanisms

14 and platforms for international cooperation and exchanges and to regularly organize forums. The fifth suggestion is to build an international Association of agricultural risk study to facilitate coordination and increase efforts on agricultural risk management. That is all for my opinion. Finally, I cordially invite everyone to China, and to China Agricultural Risk Management Research Association. Thank you! China Agricultural Risk Management Association June 10th, 2013