China pledges US$1.5b in grain farmer subsidies to offset soaring production costs

One-off subsidy aims to support summer harvest and autumn sowing, CCTV reports, citing China’s cabinet
Spring planting disruptions caused by Covid-19 curbs and war in Ukraine weigh on Chinese wheat output forecasts

China food security

Amanda Lee

Published: 5:23pm, 22 May, 2022

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China has pledged to distribute another 10 billion yuan (US$1.5 billion) in subsidies to grain farmers, to help bring down the soaring cost of production as part of the government’s latest attempt to manage the impact of rising commodity prices.

The one-off subsidies aim to support summer harvest and autumn sowing, state broadcaster CCTV reported on Sunday, citing a decision by the national cabinet – the State Council.

This comes as China looks to ensure farmers are incentivised to keep producing food for the world’s most populous nation. In March, Beijing said it would provide 20 billion yuan from the central government budget to protect grain growers from rising prices of farming supplies.

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The latest subsidies will be allocated to grain producers, including individual farmers, family farms, farmers’ co-operatives, agricultural enterprises and related entities, all bearing the brunt of the rising costs of agricultural materials, according to CCTV.

The announcement follows Premier Li Keqiang’s visit last week to southwestern Yunnan province, where he emphasised food security and pledged more subsidies to help farmers cope with the rising cost of production, according to state media reports.

Grain prices in China have spiked since the start of the year on lower wheat output forecasts, amid concerns over spring planting disruptions caused by tighter Covid-19 control measures, as well as the rise in global agricultural commodity prices following Russia’s invasion of Ukraine – a major grain exporter.

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Domestic prices of fertiliser have also soared, especially for the widely used potash fertiliser, over 60 per cent of which has to be imported, Fitch Ratings noted earlier this month. Tighter supply and higher input costs were likely to further push up domestic prices of wheat, corn and rice in 2022, the US ratings agency said.

China has also been releasing soybeans from its reserves in weekly auctions, in an effort to boost supplies in the domestic market and cool prices.

The national grain trade centre said it would sell another 500,000 tonnes of imported soybeans from state reserves on May 27.

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