In addition to grain price hikes since mid-October, farmers can expect to benefit from the government's massive capital input into rural regions, plus agricultural tax cuts this year as promised at the ongoing session of the National People's Congress.

Now, the State Council has reiterated plans to strengthen China's grain production capacity by urging local governments to be conscientious in subsidizing grain producers. They are also to convey to farmers that grain production will be encouraged in a "more direct and effective way."

The message from a recent State Council meeting, carried in major Chinese newspapers Wednesday, did not provide more details.

But a reliable source said a record 150 billion yuan (US$18 billion) is likely to be spent this year on moves to fire up farmers to produce more, improving rural infrastructure and ensuring the country's food security.

The figure represents a jump of 30 billion yuan (US$3.6 billion) over last year, according to sources with the Office of Financial and Economic Leading Group of the China Communist Party Central Committee.

"That means an average of 166 yuan (US$20) per person among 900 million rural people," Xinhua quoted Office Director Wan Baorui as saying.

Although the reduced planting area has been often cited as a major reason for the downturn in grain output over the past few years, the interest of many farmers in growing grain has also been flagging owing to low returns, experts said.

China's grain output dropped 5.8 percent from 2002 to reach 430.65 million tons last year. The figure is expected to rise to 455 million tons in 2004, a key year for recovering grain production and averting a detrimental swing in the supply-demand balance, Minister of Agriculture Du Qinglin said earlier.

"To rekindle farmers' enthusiasm for grain production, we're making sure that their benefits from supporting fiscal spending and from sales of farm produce--whose prices rose substantially last year--will not be dented by irrational rises in the production costs," said Yang Jian.

Farmers' greatest expenses are in purchasing agricultural production materials, said Yang, director of the Planning Department of the Ministry of Agriculture.

In Anhui Province, a major grain producer, grain prices surged 20 percent last year. However, the incremental pace failed to match that of fertilizers and diesel oil. For example, the price of carbamide has grown nearly 30 percent over the past few months, say local agricultural departments.

The National Development and Reform Commission has already sent supervisory teams to major grain producing provinces, including Heilongjiang in northeast China and Shandong in east China, to ensure a rational fertilizer supply is maintained, a commission official confirmed Wednesday.

(China Daily March 11, 2004)