The Price Competitiveness Of Chinese Corn

Centered on the cost analysis of Chinese corn production and detailed comparisons of other price-distorting factors of Chinese corn and its main competitor-US corn, this paper analyzed the potential for improving Chinese corn's price competitiveness. " Comparable Cost" and "Practical Cost" were discriminated at first in view of the specialty of agriculture production cost accounting in China. A general observation of two counties' "comparable cost" and "practical cost" shows that despite of the devaluing of the RMB, faster increase of China's "comparable cost" has drawn her "practical cost" closely with that of USA since 1996, which accounted for the main part of the increase of her "practical cost". A Translog cost function (i.e. the "comparable cost") was estimated to evaluate the impacts on the average cost of output, factor prices, and technological progress. The estimation result calculates the elasticities of the average cost to the output, prices of labor, fertilizer, fuel, seeds, and animal power was respectively at -0.26, 0.43, 0.23, 0.21, 0.074 and 0.056 on a 5-year-average base while the impacts of technological changes is negative in most provinces and years. Detailed comparison of regional costs shows that china's main corn-producing provinces' "comparable cost" was lower than that of Heartland. The impacts of other price-distorting institutions and policies, including tax, domestic support, logistics expenses, exchange rate were also discussed on a comparison base between China and USA: China's tax and local non-tax charges imposed on corn production total a distortion of 15% of the "practical cost" since 1998, while US's tax, insurance expenditure and land total a distortion of 25% of her "practical cost"; US's domestic support has substantially lowered her domestic price while the protective-price policy taken by China since 1993 helped boost her domestic price, which made a negative impacts on Chinese corn's price competitiveness. A round estimate of both countries' export price to domestic price ratio shows little difference of the logistics costs for export.