Policy reform and farmers' coping strategies: The case of corn price shocks in Heilongjiang Province of China

Zhihao Zheng, Yang Gao, Rodolfo Nayga and Yinyu Zhao

Review of Development Economics, 2023, vol. 27, issue 2, 1135-1156

Abstract: A substantial decrease in corn prices caused by the policy reform in 2016 in China led to heterogeneous supply responses of corn producers: decreasing corn acreage, making no change in corn acreage, and expanding corn acreage. We investigate the causes and consequences of cropland allocation of the supply responses using the balanced panel data on corn‐producing households from 2015 through 2016 in Heilongjiang Province. We find that the corn producers largely acted in accordance with their own household resource endowments to make their choice decisions in response to the corn price shocks. Our results show that the decrease in corn prices led to a small decline in total corn acreage and a considerable increase in total acreage for soybeans and rice in 2016 and that the increase in total soybean acreage was more through area expansion rather than through substitution. Our results also show that crop structure for large‐scale producers was more responsive to corn price than for medium‐ and small‐scale producers. Given that continuous corn rotation prevails currently in Heilongjiang, our major finding suggests that the acreages planted to corn and soybeans cannot be easily adjusted by the market.

Date: 2023
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