Government subsidies to increase wheat and grain production has significantly improved the profitability of crops and created an incentive for growers to expand acreage. This action represents a very decisive approach to China's dual task of controlling domestic food inflation and boosting rural income. At last week's meeting of the State Council, two priority policies were applied to the agriculture sector. The first was to raise the purchase prices of grain and second was to increase agriculture subsidies.
In Xinjiang Province, the government increased farming material subsidies for wheat to the equivalent of just over 213 U.S. dollars per hectare in the south and 206 USD in the north; a quality subsidy was also added. Procurement prices for wheat are also up 20% above year-ago levels, leading farmers to increase winter wheat acreage. Winter wheat is taking some land away from cotton due to the profit margins, which are estimated to now represent the equivalent of 650 to 660 USD per hectare. 2008/09 winter wheat acreage in Xinjiang is expected to exceed 600,000 hectares. The 2008/09 season represents the first time winter wheat is a more profitable crop than cotton.
