Study On The Purchase Price Of Tobacco Leaves Based On Tobacco Farmers' Income

In tobacco industry of our country, the current situation of tobacco production is getting more special, high-quality tobacco leaf is in short supply, to ensure tobacco leaf’s sustainable production with high quality, efforts from tobacco companies, local governments and farmers are necessary. In these three factors, the enthusiasm of farmers to plant tobacco is the decisive factor to stabilize the production of tobacco, and tobacco companies and governments have impacts on the kinds of tobacco farmers’ wishes of planting tobacco by controlling relevant policies and subsidies. Upon all of these factors, the policy of tobacco price, which is formulated by the State Tobacco Monopoly Bureau in considering the price, the state investment funds, international tobacco prices, is one of the most significant factors in affecting farmers’ earning expectation.Considering the characteristics of China’s tobacco production and the aim of formulating tobacco prices, this article analyzes the earnings and comparative earnings of tobacco planting farmers in Yunnan, modeling and hypothesizing farmers’ earnings and the price of tobacco leaf, and conducting an empirical research to the relation between tobacco price and farmers’ earnings. According to the characteristics of China’s tobacco production, based on data of earnings and comparative earnings of tobacco production in Yunnan province, we determine the indicators which are closely associated with purchase price of tobacco, and pick up data points which can truly reflect the income of farmers and tobacco price in Yunnan province, establishing regression equation for farmers’ income, comparative income and tobacco leaves’ price, building a model with two stage least square method. Going a further step, exploring the influence of tobacco planting farmers’ income giving on price of tobacco leaves, making recommendations on tobacco acquisition pricing.Doing research from the perspective of planting tobacco earnings impacting tobacco purchasing prices has more advantages, one of them is that it can describe the inner factors of formulating tobacco price more intuitively, and better reflect the characteristics of the tobacco price. Although tobacco belongs to agricultural products, its productive process has great difference with them, it has higher costs and greater risks, as a result, this paper will take the element of planting tobacco’s comparative earnings into consider when conducting empirical analysis, in addition, for the high endogenous of the explanatory variables(tobacco farmers’ earnings), we will use instrumental variable approach to solve this problem, building econometric model of tobacco price, calculating and estimating the equation to draw relationships between variables, thus make policy recommendations about perfecting the pricing of tobacco purchase.