China will maintain a minimum purchase price for wheat, safeguarding 25-30 percent profit margins for farmers, according to the National Development and Reform Commission (NDRC), the country's top economic planner.

The minimum purchase price for main crops, started in 2006, is designed to provide encouraging profit margins for farmers as well as prevent food price fluctuations and consequent food shortages.

Prices fall when crops are abundant, discouraging farmers from growing crops and consequently threatening food safety in the country, said Research Center for Rural Economy director Ke Bingsheng.

Chinese farmers, who account for about 80 percent of the total population, also benefit from the minimum purchase price, according to Ke.

The minimum prices are the same as last year because prices of agricultural materials have remained relatively stable, NDRC sources said.

For example, the average retail price of carbamide, a kind of fertilizer, declined by three percent year on year to 1,835 yuan per ton in May, NDRC officials said.

Meanwhile, China's direct subsidies to farmers shot up by 63 percent from a year earlier to 42.7 billion yuan, according to the NDRC.

The subsidies include 15.1 billion yuan for grain planting and 27.6 billion yuan for farming materials such as fertilizers and pesticides.

The 2,000-year-old rural tax system was scrapped in 2006, and China began offering farmers direct subsidies to boost their incomes as price hikes in fertilizers and other farming materials ate into their revenues.

The Agricultural Development Bank of China (ADBC) plans to loan 53 billion yuan to six provinces -- Hebei, Jiangsu, Anhui, Shandong, Henan and Hubei -- in China's major wheat-producing regions to guarantee the minimum purchase price for wheat.

When the market price is lower than the minimum price, government-nominated firms will purchase wheat at the minimum price, the ADBC said.

The ADBC said it has already loaned 2.18 billion yuan to four provinces.

China has harvested 170 million mu (11.33 million hectares) of wheat, the Ministry of Agriculture said on Wednesday.

The floor price for 50 kilograms of white wheat has been set at 72 yuan, and 69 yuan for red wheat, the NDRC said. (one U.S. dollar equals 7.65 yuan)

Source: Xinhua