China's agricultural production is entering a high-cost age. China's top economic planner, the National Development and Reform Commission (NDRC), announced on 19 March 2012 that it would increase the prices of gasoline and diesel both by USD95 (RMB600) per tonne, which has been implemented since the next day. The retail price of gasoline exceeded USD1.26/L (RMB8/L) for the first time.
The price rise of oil will directly impact mechanical farming and irrigation. Besides, the cost of pesticides and fertilizers are expected to increase due to higher oil price. To ensure that farmers' income will not be dragged down by the recent oil price hike, the Ministry of Agriculture revealed on 21 March 2012 that it will provide an additional subsidy of USD3.86 billion for farmers.
Although China has offered lots of subsidies to compensate for the price increase of agricultural production means in recent years, these subsidies are not enough. Farmer's low income from agricultural production has been further impacted by the high production cost.
By contrast, the prices of agricultural produces have to maintain at a low level, for the control of China's consumer price index (CPI).
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