January 8, 2007

 

China's grain price may not rise further

 

 

China could soon get over its price rise of grain products and there is limited room for future price rise considering the generally balanced supply and demand situation in the country's grain market.

 

Price of grain products rose 4.7 percent in November, per National Bureau of Statistics figures.

 

However, the rise in prices was not due to a fall in output as China's grain output has grown in three consecutive years as of 2004. In the years of 2004 and 2005, grain product output rose by 38.8 and 145.5 billion kilograms respectively year on year and in 2006 total grain products could surpass 490 billion kilograms.

 

Experts have attributed the price rise to price fluctuation in the international grain market.

 

Wheat, for instance saw a fall in output in many countries in 2006, which raised its price in international market. Besides, Chinese government adopted policies to ensure profits for farmers which also resulted in raising the purchase price of wheat.

 

Corn price hike was mainly due to an increasing demand for it, much of which was also going into biofuel use. China's corn prices have risen by between RMB200 and RMB300 a tonne over the past two months, thanks to rising demand from corn processors and exporters, coupled with speculative buying.

 

In the wake of the price hike, the State Development and Reform Commission (SDRC), China's top economic planning body, has put a halt to the processing of corn for ethanol.

 

The government has also started auction of grain in a bid to halt rising grain prices in the domestic market.

 

With relatively balanced supply-demand situation and government initiatives aimed at curbing prices, grain price is unlikely to rise.

 

However, some experts felt uncertainties still existed for China's grain due to the country's huge population and scant arable land.