February 3, 2009

China will keep building grain state reserves and encourage companies to construct commercial storage in an effort to stop sharp falls in prices, a senior official said on Monday (February 2).

 

Chinese policy makers are seeking ways to increase farmers' incomes in the light of an abrupt economic slowdown. The Communist Party has put on its policy priority list.

 

Chen Xiwen, Director of the Office of the Central Rural Work Leading Group, in a news conference, said the government would also raise floor price for government grain purchases.

 

He said the government will set a minimum purchase price to prevent prices from falling excessively as agri-product prices will depend on market supply and demand.

 

Chen also said Beijing would consider increasing grain exports at reasonable prices to better balance domestic and global demand and supply.

 

The government planned to offer farmers up to 120 billion yuan (US$17.53 billion) of subsidies this year, up from 102.9 billion yuan in 2008, to increase their incomes and protect them from suffering a heavy blow from the economic slowdown.

 

Beijing would also increase the minimum grain price for state purchases by an average of 0.22 yuan per kg, which would add more than 110 billion yuan of extra income for farmers based on 2008 production of 530 million tonnes, Chen said.

 

The National Development and Reform Commission --China's top economic planner--announced in January that it would increase minimum purchase prices for rice by more than 10 percent to shore up farmers' incomes.

 

The floor price for buying the main rice varieties from farmers will rise by 13 yuan (US$1.90) for every 50 kg.

 

This will lift the price of early long-grain to 90 yuan (US$13.2) for every 50 kg and medium and late long-grain to 92 yuan (US$13.5). Round-grain rice will rise to 95 yuan (US$13.9).

 

US$1 = RMB6.84091 (Feb 3)