Dim Sums: Agricultural Markets in China

China has come a long way from the days of Marxism-Leninism. The Farmers Daily newspaper (the title used to be translated Peasants Daily in the old days) brings up the economic concept of “opportunity cost” in a July 16 article discussing declining profits from selling wheat, showing that Adam Smith may be more influential than Mao Zedong in today's Chinese economy. The journalist notes that fertilizer and diesel prices have raised wheat production costs about 80 yuan per mu (that turns out to be about $80 per acre at the present exchange rate). The government raised the minimum price for the recently-harvested wheat by about 0.05 yuan per jin. With a yield of 800 jin per mu, that works out to an increase of 40 yuan in revenue per mu, so profits are slimmed down, and farmers are wondering whether market conditions might push prices higher in coming months, making it advantageous to sell later. (By the way, wheat and rice are the only major crops that have minimum prices--most pri...