Labor costs drive increases in costs of grain production in China

Available Chinese data indicate that average cash expenses rose during 2003-11 by $190 to $220 per acre for corn, wheat, and long-grain rice, while expenses for short-grain rice rose by nearly $400 per acre. While discussion tends to focus on increases in cash expenses for inputs like fertilizer and fuel, the increase in production costs has been more broadly based. The data show that the implicit cost of unpaid family labor was the dominant component of farm production costs. The imputed cost of family labor rose from $94 per acre to $244 per acre during 2003-11, a reflection of rising wages and opportunity costs of farm labor. Other inputs that are the object of subsidy programs—seeds and mechanized services—also contributed to increases in production costs. Overall, the increases in production expenses far exceeded the increase in subsidy payments during that period. Growth in off-farm work opportunities poses the biggest challenge to maintaining agricultural output. As prospective off-farm wages rise, farmers require higher net returns to induce them to continue planting crops or raising livestock. This chart can be found in Growth and Evolution in China’s Agricultural Support Policies, ERR-153.

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