The current price support policies in China have positive impacts on grain prices and production costs. These policies mediate the impacts on grain supply and demand, and, in turn, affect food security and farmer income. This paper simulates and empirically establishes the effect of price support policies on food security and farmers' net incomes through a partial equilibrium model that considers the policy impact mechanism. The results indicate that a 10 per cent support price increase in 2012 may result in (1) an increase of 1.38 and 6.19 percentage points in self-sufficiency rates for rice and wheat, respectively, in the current year and (2) a respective increase of 28.6 and − 18.5 yuan/mu in net income for rice and wheat production in the year. Given the significant growth in grain support prices since 2008, the price support policies have produced a tremendous impact in terms of enhancing grain self-sufficiency, while playing a crucial role in China's food security strategies. However, due to the increased production costs associated with policy implementation, the income effect of the price support policies is rather small and even negative for wheat production. Hence, increasing farmers' incomes should rely on other effective measures, such as providing income subsidies.
Food security is a critically important issue in China and can be enhanced by implementing subsidy policies. This paper employs a partial equilibrium model which takes into account the impact mechanism of subsidy policies to simulate the impact of current subsidy policies on grain supply and demand and on enhancing grain self-sufficiency in China. The simulation results suggest that subsidies can generally promote grain production, reduce consumption, increase imports, reduce exports and increase ending stocks. Subsidies may also result in increases in grain self-sufficiency rate and stock-to-use ratio, but the increases are relatively small, indicating that the subsidies lack efficiency. Given that subsidies constitutes only a very small share of farmers’ total income, and that significant scope remains for increasing subsidy levels in China, employing subsidy policies can help to enhance or at least maintain China’s grain self-sufficiency at a high level. Various measures should be implemented to improve the inefficiency of the current subsidy system, such as (1) combining different types of subsidies; (2) providing discriminatory subsidies to poor/rich farmers or developing/developed areas; and (3) increasing subsidy rates for wheat and corn.
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