Sensitivity analysis of the policy of minimum grain purchase prices

The grain price, the base of all other prices, is relatively sensitive to policy adjustments. The too high minimum purchase prices will lead to the imbalance of the grain market, while the decline of the minimum purchase prices will exert a direct influence on business entities’ expectation of the market prices in the following year. With the early long-grain nonglutinous rice, the middle-late long-grain nonglutinous rice, the round-grain nonglutinous rice and wheat as instances, this article applies the stepwise regression model and the data between 2004 and 2014 to simulate the effect of the minimum grain purchase prices of 2018 on the cultivated area and the yield of the early long-grain nonglutinous rice, the middle long-grain nonglutinous rice, the round-grain nonglutinous rice and wheat as well as farmers’ corresponding revenues. As suggested by the research, the minimum purchase prices play a significantly positive role in the fluctuation of the rice and wheat prices. In case of the same decline rate of minimum purchase prices, the round-grain nonglutinous rice sees the greatest decline rate of the cultivated area and the yield, followed by the middle-late long-grain nonglutinous rice, while the cultivated area and the yield of the early long-grain nonglutinous rice show the smallest decline. However, when deciding to plant rice and wheat, farmers not only consider about the changes of the minimum purchase prices of rice and wheat, but also are subject to the technical input, the revenue and the cost etc. The government may appropriately adjust the minimum purchase prices of rice and wheat to adjust the cultivated area of rice and wheat, thus to stabilize the cultivated area of rice and wheat in China and realize a win-win situation between society and farmers.