While touring north China’s Hebei Province, Premier Wen Jiabao heard complaints from grain farmers who fear their benefits are likely to be eroded by irrational rises in production costs.

In the seven-month period ended March, price hikes have raised costs to farmers by some 39 billion yuan (US$4.7 billion) compared with the same period a year ago.

“The scale of these price increases for fertilizer, pesticides and other production materials has seldom been seen in the past,” a Ministry of Agriculture official surnamed Zhang told China Daily.

In March, the price of carbamide rose 13 percent year-on-year, while phosphate fertilizer jumped 20 percent.

China’s grain prices started to increase in October of last year in a trend that is expected to continue during the next few months as demand continues to exceed supply.

But farmers worry that may not be enough to offset their higher costs.

Sixty-year-old Wang Tao, a farmer in central China’s Hunan Province whose main crop is rice, said production costs will increase by 300 yuan (US$36) per hectare this year.

“I’m not sure if I can earn anything by planting rice, especially when the seeds and fertilizer are so expensive,” said Wang.

Grain output is high on the government’s agenda. To increase incomes for China’s 900 million farmers, this year, the Chinese government has earmarked 10 billion yuan (US$1.2 billion) from its grain risk fund for direct subsidies to grain farmers to curb falling output and bolster income growth.

From 1997 to 2003, farmers’ per capita disposable income rose 4 percent on average, in sharp contrast to the 8 percent jump in the income of urban dwellers.

China’s grain output dropped 5.8 percent from 2002, reaching just 430.7 million tons last year. The target is set for 455 million tons in 2004, a key year for grain production.

Lin Yueqin, a researcher with the Chinese Academy of Social Sciences, said that a basic way to ensure stable grain output is to protect arable lands.

The National Development and Reform Commission said price regulation can be used to provide farmers with incentive to increase grain output.

Last week, it set the minimum purchase price of early-season indica, the most widely cultivated variety of rice in China and other Asian regions, at 1.4 yuan (17 US cents) per kilogram, up from the regulated price of 1.2 yuan (14 US cents) in 2003. Regulated prices for other rice varieties will be announced soon.

The General Administration for Quality Supervision and Inspection and Quarantine yesterday started a nationwide campaign to end cheating in the selling of fertilizer, seed and pesticides.

Liu Zhaobin, director of the administration’s Regulation Department, reassured farmers that the government would strengthen supervision over the prices of production materials, especially chemical fertilizers.

(China Daily April 7, 2004)