Gale says the result of the Chinese policy is to keep prices high and a strategy of storage as long as possible. “The stated goal of the price support programs is to prevent steep declines in farm prices by purchasing commodities during periods of slack demand. Tying the floor price to increases in production costs and requiring commodities to be resold at a higher price that recovers storage costs builds in a strong tendency for prices to increase.”
Because of the ability for the U.S. market to ship high quality grain rapidly to China, the U.S. farmer has been the beneficiary of Chinese agricultural policies according to Gale, “U.S. farmers have been major beneficiaries of a Chinese agricultural import boom that coincided with the growth in Chinese agricultural support. China is now the leading destination for U.S. agricultural exports (up from seventh in the early 2000s). U.S. agricultural exports to China totaled $5 billion in 2003—the year before China began its direct subsidy payments. By 2012, U.S. sales of agricultural commodities to China had risen more than fivefold to nearly $26 billion per year. China now accounts for 18 percent of U.S. agricultural export sales, up from 8 to 9 percent during 2003-07.”
China’s growing population has required substantial changes in its agricultural policies. The result has been a complex web of high subsidies for every facet of agriculture, and grain prices maintained at high levels. While China does not pay those high levels for its purchases, U.S. grain has been flowing in high volumes to China in the past several years as that country’s main food supplier.