Since 2004, Xinjiang has set a support price for wheat and given farmers subsidy of 0.3 yuan for each kilogram of wheat they sold to state-owned enterprises. Since 2009, the region has set an annual plan to purchase 1.5 mmt of wheat for a "temporary reserve." An official said that paying farmers based purely on the weight of grain sold encouraged them to produce maximum quantities without regard to quality. The policy was set to ensure that the region -- in China's northwest far removed from the main wheat-producing regions -- could meet its food needs with a small surplus. Instead, an official told Grain and Oils News, farmers produced a bloated surplus and there is no room in storage facilities. Farmers became overly reliant on selling to the government, and undermined the marketing system, officials explained.
This year Xinjiang will begin "supply side structural reform" for wheat. Officials say the wheat price for farmers will be set by the market, with prices rewarding farmers for high quality wheat demanded by the market. "Diverse players" will enter the market, and Xinjiang will no longer carry out the 1.5-mmt "temporary reserve" purchase plan.
The government will still have a significant role, however. An annual wheat production plan will be drawn up for each county. Pilot programs will promote selenium-enriched wheat, organic wheat, and strong gluten wheat and brands in various regions. Minimum and maximum inventory guidelines will be issued to warehouses and mills. Banks will be instructed to set aside funds to finance grain purchases by marketing enterprises, and interest rates will be subsidized.
Farmers will get more generous subsidies. The "cultivated land fertility protection" subsidy will be increased by 30 yuan per mu for winter wheat and 15 yuan for spring wheat to ensure that grain is profitable enough to attract farmers, Grain and Oils News said. Information about this subsidy is elusive. Funds are issued to counties which set the amount of the subsidy.
News items say farmers who grow wheat, corn for silage, alfalfa, field corn and unspecified specialty crops are eligible for the land fertility protection subsidy. (Cotton, sugar beet producers are not eligible--they have their own subsidies.) In one region, a calculation indicates the land fertility subsidy was 56 yuan/mu in 2017 and would therefore be 86 yuan/mu this year. In Wusu prefecture, a document specifies a subsidy of 100 yuan/mu for producers of wheat, corn for silage, alfalfa, and 18 yuan/mu for field corn, tomatoes for processing, sunflowers, and melons. The same subsidies were announced for Bayingol Meng Prefecture in January and for Yili Kazakh Prefecture in 2016.
In principle, the land fertility subsidy is intended to pay for measures to restore soil fertility, but no conditions for receiving the subsidies are specified.
A reform of wheat policy announced in Xinjiang may indicate China's new direction for food grain policy. The minimum procurement price policy for the core wheat regions of Hebei, Henan, Shandong, Jiangsu, Anhui, and Hubei has always been distinct from Xinjiang's wheat policy. A Ministry of Agriculture report on supply side structural reform for wheat issued in 2017 also blamed the price support program for prompting farmers to produce excess supplies of moderate-gluten wheat because it rewards them for test weight and low proportion of imperfect kernels but not for gluten or protein content. A Chinese Academy of Agricultural Sciences study of wheat samples from 2006 to 2015 found that the proportion of wheat meeting standards for strong gluten declined by half over the period and the proportion meeting weak-gluten standards remained minimal over the study period.
A similar strategy of direct payments in exchange for reducing support prices has been promised for rice this year, but no concrete measures have been announced.