Thursday, March 25, 2010

Subsidies attract fake agricultural inputs

A news report from the official Xinhua News Agency on March 14 urged local governments to crack down on the sale of fake and shoddy agricultural inputs. The article points to an unintended consequence of subsidies: if you hand out cash, crooks will be drawn like flies to try to grab it.

The report cites "statistics" released by the consumer rights associations in Shandong and Anhui Province that showed huge increases in complaints about fake and shoddy seeds, fertilizer, and pesticides.

The article assures us that the central government's efforts to bring order to agricultural input markets have been effective. It says big incidents of fake inputs are less frequent now. However, the article says the problems have become more diffused and the increase in complaints show that the problem has not gone away. The article says complaints from Shandong show that input dealers exaggerated the benefits of new seed varieties that hadn't been scientifically tested, and farmers got poor or no harvests.

Interestingly, the article links the surge in fakes to agricultural subsidies. It points out that the government has increased incentives to produce grain by giving favorable policies in recent years, in turn causing the agricultural input market to flourish. It goes on to say, "Statistics from the Shandong and Anhui consumer associations show that some enterprises and merchants now are exploiting this excellent situation for illegal profit-making, using shoddy agricultural inputs to entrap farmers."

The article doesn't state explicitly that the biggest chunk of subsidies in the last few years have been subsidies to compensate farmers for rising input prices.

The article warns that “problem” seeds, fertilizer, pesticides and other agricultural inputs may affect grain production, product quality, and could affect rural social stability.

The article then becomes an instructional memorandum for local Communist Party apparatchiks: "Continuing problems with quality of agricultural inputs exposes the continued chaos in agricultural input market operations. Regulation is still lacking. All levels of government need to be reminded to crack down, simultaneously speeding up innovation in operation mode of agricultural input markets, standardizing market order, protecting farmers interests and incentives to produce."

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