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Rising prices eating into farmers' income

By Fu Jing and Wang Lan (China Daily)
Updated: 2008-07-25 08:49

"Vegetables from our village are sold not only in China but also exported to Japan and South Korea," Li said.

"The increasing demand and plus decent prices in turn continues to attract more growers to cultivate vegetable greenhouses instead of wheat fields."

In response to such trends, the authorities have rolled out measures to protect grain purchase prices and given out grain subsidies to encourage farmers to grow grain.

In the beginning of the year, the State Council approved 95.063 billion yuan in subsidies for farmers - with 1 billion yuan going to those who grew wheat and oilseed.

Similarly, the central authorities vowed this year to spend 562.5 billion yuan to support farmers and the rural sector, 130.7 billion yuan more than last year.

It decided in March to allocate another 25.25 billion yuan to this year's budget for the sector, mainly to subsidize farmers' purchase of seed, diesel, fertilizer and other production costs.

To further secure the country's food and grain reserves, the government has also worked out compulsory requirements on planting areas and varieties of grain being farmed.

Still, farmer Li said a "protective price system" to ensure grain prices did not guarantee a steady increase income along with the rise in costs. The prices at which grain was being sold to collectives remained more or less the same over the past several years, Li said.

"But fertilizer and fuel costs have continued to increase," Li said. "Our net income has, in effect, dropped from the year before."

In Hunan province, a survey found that a ton of the major fertilizer, carbamide, cost 660 yuan in 2002. That amount rose four times to 2,560 yuan this June.

The price of rice, however, reportedly increased by 40 percent in the last five years.

Cai Fulin, a 43-year-old corn farmer in Fuyu county of Liaoning province, had a similar story to tell. The cost of one type of fertilizer he uses rose by 31 percent to 2,500 yuan per ton from the year earlier.

"Our modest income increase has largely been eaten up by the surging cost of fertilizer," Cai said.

Li in Zhongcaiwan village said the price hikes of gasoline and diesel have also hurt.

"The price of diesel has risen by 33 percent to 8 yuan per kilogram from early this year, rising 185 percent from the previous year," Li said.

Faced with the global grain price hike and the rapid increase in production costs, leading economist with Chinese Academy of Social Sciences Zhang Zhuoyuan has urged the government to raise the minimum prices of grain.

"We need a strong commitment to raise the price of grain, which can help increase farmers' income and rekindle their enthusiasm in farming," Zhang said.

"Only then can they secure our grain supply in such a fragile and competitive global market."

To further reduce the financial burden of farmers, the central government recently ordered an inspection of prices and fees charged by local governments for water, electricity, education, homebuilding, cable TV and livestock epidemic prevention services.

"Exorbitant charges must be waived and higher-than-normal fees must be lowered nationwide," the authorities have said in a circular.

Economist Zhang Zhuoyuan said the country still faces a number of challenges in securing the grain harvest this autumn, including potential floods, drought, typhoons and pests possibly disrupting crops.

The country's wheat output this summer topped 120 million tons, 2.5 million tons more than a year ago, figures from the Ministry of Agriculture have showed.

But summer crops usually account for about 23 percent of annual grain output, far less than the autumn harvest, ministry figures showed.

"We need farmers to be committed to the sector if we are to feed our people," Zhang said.

"Fattening their pockets is one way to do that."

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