Grain is an important commodity in developing counties. Fluctuations in grain prices not only influence the process of economic development, but also have an effect on the lives of peasants. A feature of China’s grain price is that it fluctuated dramatically before 2004, and has been stable and has risen gradually since then. This price change pattern is distinct. Food shortages constitute the main agricultural problem in the early stages of economic development. Even if the problem could be avoid, however, it is unlikely that grain would end up in surplus while the economy grows rapidly at the same time. I argue that the fluctuation in China’s grain price can be explained by dual-economy model, the policies of labor mobility control and forced grain production throw both the food market and labor market out of balance, hence making the price unstable.