Impacts of China’s Minimum Grain Procurement Price Program on Agrochemical Use: A Household-Level Analysis

Abstract

China’s minimum grain procurement price program aims to boost grain production and ensure food self-sufficiency. It may also affect the already very high levels of chemical fertilizer and pesticides consumption, but little is known about these potential side-effects. In this paper, we apply panel data regression techniques to a large rural household-level data set for the period 1997–2010 to examine whether and how the minimum grain procurement price program affected households’ agrochemical use. We find that the minimum grain procurement price program negatively affected both chemical fertilizer and pesticides use, with pesticides use being more responsive than the use of fertilizer. The higher wheat and rice prices that resulted from the program stimulated the use of agrochemicals, but they also stimulated area expansion which contributed to lower agrochemical use per unit of land. These counteracting indirect effects were overshadowed by the large negative direct effect of the minimum procurement price of rice on the use of fertilizer and pesticides.