"To insist on implementing last year's policies would be difficult," he told Reuters in a recent interview. The quota price is a fixed price at which grain farmers are obliged to sell to the grain bureau. The protected price, which is lower than the quota price, is for any remaining grain they wish to sell. Prior to the introduction of last year's reforms, the grain system was running up losses at an estimated 14.5 billion yuan (about $1.8 billion) a month. Many experts believe the losses could have worsened since then.

Under last year's grain reforms, grain bureaux must buy all the grain farmers want to sell and they were given themonopoly of purchase and distribution of grain. The grain which the bureaux resold had to be priced to cover costs and yield a small profit. Li said the system unravelled because the grain supply was larger than the system could handle and monitoring implementation of the policies at the sub-county level was nearly impossible.

But he said the policies had partially succeeded in stemming the losses, especially after the government tightened surveillance in the second half of the year. The farm reforms have been criticised as a reversion to central control, but Li said those criticisms ignored the government's successes in abolishing fixed national grain prices and quotas.

"The goal of the reforms is to make the farming sector more market-oriented, with the government retaining only the macro adjustment function," he said. Banning private dealing was a stopgap measure and in this year's harvest large grain processors were likely to get permission to buy grains directly from farmers, although the grainsthey purchased must be for their own use only, he said. Li said the stock pile problem, after four years of bumper crops, remained acute even with the construction of of new granaries.

"No country can afford buying and storing all surplus grains," he said, noting that the cost of storing a tonne of wheat for four to five years amounted to the price of purchasing a tonne of new wheat.

To ease the strains on the granaries, the government was expected to stop purchasing early rice and to cut back on the purchase of spring wheat, Li said.

"Policy changes on early rice and spring wheat were overdue because the bland taste of these grains have long been spurned by consumers."Li said that with the coming winter wheat harvest estimated at about the same level as last year's, the grain system could count on stability for the implementation of the changes.