Saturday, July 9, 2016

Heilongjiang Soybean and Grain Subsidies Announced

The target price subsidy will be 130.87 yuan/mu for soybeans planted in Heilongjiang Province during 2015, according to an announcement by Provincial authorities. That is equivalent to $118 per acre at the current exchange rate.

The 2015 subsidy is more than double the 60.5 yuan/mu ($55 per acre) that was given for 2014 soybeans. There is no news about soybean subsidies in other provinces. Last year's target price subsidy for soybeans was 54 yuan per mu in Jilin and reportedly just 10 yuan per mu in Liaoning.

The soybean subsidy will be distributed to farmers based on the area of soybeans they planted for the 2015 crop (approximately 15 months ago) that has harvested last fall. The subsidy funds will arrive several months after farmers planted their 2016 crop. The subsidy for the soybean crop currently in the ground will be paid out a year from now in 2017.

The target price subsidy is a trial program for soybeans initiated in 2014 for northeastern provinces. The subsidy is paid out when the market price is less than the target of 4800 yuan per metric ton. The subsidy is the difference between the target and the provincial average market price multiplied by the average soybean yield. Authorities did not reveal the yield nor the market price they used to calculate the subsidy. If the yield was 120 kg/mu, it implies the difference between the target and market prices was 1090 yuan/metric ton. That, in turn, implies the market price was 3710 yuan/metric ton. This is near the bottom of current price quotations in Heilongjiang, which range from 3700 to 4000 yuan.

Heilongjiang also announced that the new combined grain subsidy for this year will be 71.45 yuan/mu ($64.73 per acre). This is a single payment that combines three previous grain subsidies (a direct payment, a seed subsidy, and a general input subsidy). The announcement refers to the new "agricultural support and protection payment" as a subsidy to preserve land fertility, but it does not mention any requirement about how the subsidy payment should be used by recipients.

In Heilongjiang the land base for distributing to the farmers is in transition. The province is in the process of determining farmers' land rights province-wide. For now, the grain subsidy will be distributed based on each farmer's historical contracted land area. The announcement notes that a lot of farm land is rented out, which raises questions about who gets the subsidy--the renter or the land lord. In cases where there is no rental contract specifying which party is entitled to the subsidy, the person holding the contract rights to the land (the landlord) receives the subsidy.

A new subsidy for corn producers promised for this year has not been announced, but a post on a number of web sites last month said the new corn subsidy will be around 170 yuan per mu. According to the posting, the corn subsidy will be offered in Heilongjiang, Jilin, Liaoning, and Inner Mongolia, and local officials will determine the final amount of the subsidy and how it will be distributed.

It appears that a two-layer subsidy program is emerging in which subsidies are given for particular crops on top of a basic entitlement payment for farmers. It seems likely that at least some farmers in Heilongjiang may receive the 130.87 yuan soybean subsidy and 170 yuan corn subsidy for land they plant in those crops, in addition to the 71.45 yuan "land fertility" subsidy.

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