ABSTRACT

This chapter examines the debates and issues about grain price adjustments since 1978. Special attention is given to the relationship between price and output changes in the periods 1978-84 and 1985-92. It identifies price distortions remaining after price adjustments and their possible impacts on grain supply. The rural reform started in 1978 aimed at improving farmers’ living standards and introducing the market mechanism to grain production. The retail price of grain was increased to the level of the market price in 1992 when the government took further steps to reform the retail price system. The existence of dual prices and the move to a single contract price, alongside a free market price, complicated the picture and had unpredictable effects on producers’ incentives. In one sense the changes to prices, at least until the early 1990s, arguably represented adjustment rather than reform. In spite of the significant upward adjustments, the grain price remained distorted by government measures.