For Chen Baoquan, the recent price rise in agricultural products, although welcome, did not make him any happier as production and living costs were also up.

The 46-year-old farmer once thought, by taking advantage of rising crops prices, he could earn extra money to improve his family's living standard.

Other factors also contributed to his optimism: the government abolished the 2,600-year-old agricultural tax and started to offer direct subsidies to encourage crop growing and bridge the rural-urban income gap.

His dream, however, did not come true as the surging prices of agricultural production materials and the high overall price level erased the gains from crops sales.

Chen, from a village in Pingyuan in the eastern Shandong Province, said the 500 kilogram of wheat produced by one mu (0.067 hectares) of land, on average, could be sold for 800 yuan (112 US dollars) as the current market price was 1.6 yuan per kg.

After deducting the production materials costs, including those for fertilizer and irrigation, the gross earnings, including labor, were only 500 yuan, he said.

"This (earnings) is almost flat from a couple of years ago. Though the wheat price rises by 0.2 yuan per kilogram, our production costs also surge."

He cited a 50-kg bag of compound fertilizer as an example. It had jumped to 200 yuan from 130 yuan a year ago.

The prices that started to rise since the beginning of last year had greatly eroded the purchasing power of hundreds of millions of low-income farmers like Chen.

"My family earns 5,000 yuan per year by growing crops. That could meet our living costs a year ago, but now that can no longer make ends meet," he said.

Chen Xiwen, director of the office of the central leading group on rural work, said on January 31 the price level of agricultural products should remain at reasonable and profitable levels to make farmers willing to engage in agricultural production.

Analysts believed farm produce prices were returning to normal levels as the country had long kept them artificially low to subsidize the development of the industry.

"People often see the benefits brought to farmers by the surging prices of agricultural products, but that is only one side of the coin," director Chen said. "Increasingly, more farmers are no longer self-sufficient. They also buy many consumer products, including food, at the markets."