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Govt's grain purchase price set to rise sharply

By Xie Chuanjiao (China Daily)
Updated: 2009-03-05 08:56

The government's farm procurement prices are set to see a hefty rise as policy makers try to mitigate the impact of the global economic crisis on rural residents.

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The average minimum procurement price for all grain products will rise 13 percent from last year, Chen Xiwen, director of the office of the Central Leading Group on Rural Work, told China Daily yesterday.

That would generate more than 116 billion yuan ($17 billion) of cash income for the country's 700 million farmers; or each of the rural households would earn an extra 500 yuan, enough for a month's expenses.

The country's grain output hit a record high of 528.5 million tons last year, but the recent drought in many provinces has lowered expectations this year.

Grain prices have been on the rise in the last few years but backed by large reserves, the government has been able to intervene in the market to pre-empt the skyrocketing trend seen last year on the international market, especially for such staple items as rice, wheat, and corn.

But if domestic grain prices remain too low, farmers' incomes will fall and thus hurting the overall economy, especially consumer spending, rural policy advisors said.

The graphic shows China's rural per capita cash income from 2004 to 2008. [China Daily]

Chen disclosed the government farm price initiative to China Daily on the sidelines of the ongoing annual session of the Chinese People's Political Consultative Conference National Committee.

The government will also try to raise financial support for rural infrastructure and farm technology services, Chen said.

Direct subsidies will be provided to farmers who grow grains, choose advanced strains of seeds or buy farm machinery, he said.

The subsidies will rise to 120 billion yuan this year from 102.9 billion yuan last year, Chen said.

Rural cash income has risen more than 6 percent annually in the last five years but much of the increase has come from remittances by migrant workers in cities.

Song Hongyuan, a senior researcher at the Ministry of Agriculture, said recently that remittances are threatened by the sweeping job cuts in the manufacturing sector.

Farmers' income would suffer "a sizable loss" if they are not provided access to other income sources, he said.