Farm Subsidies to Undo Damage Done by Subsidies

The area planted in corn by Chinese farmers rose by 11.7 million hectares--45 percent--over the past decade. Officials in China have bragged for years that their subsidies and guaranteed minimum prices played the key role in boosting grain production. Now officials have discovered that the country is producing far more corn than it can consume.

Adding to the list of silly things that result from farm subsidies, Chinese agricultural officials have announced that they will now spend 3.5 billion yuan (US$ 540 million) to reduce corn production. The funds are for the so-called corn structural adjustment program, which they expect to cut corn planting by 20 million mu (1.3 million hectares) this year.

It's unclear exactly how the money will be spent. The program will fund 100 pilot counties where farmers will be encouraged to switch from mono-cropping corn to rotation with soybeans or minor grains, fodder crops, crops that are in high demand (reportedly peanuts), rice, and spring wheat. The Ministry of Agriculture expects soybean planting to increase by 6 million mu this year.

It is not clear whether these funds will support new subsidies promised to corn growers this year.

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Dim Sums: Agricultural Markets in China

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