January 20, 2014

Due to rising imports, which are adding to near-record stock levels, China's domestic grain production and prices are badly affected, said Ren Zhengxiao, chief of the State Grain Administration.

Beijing regularly raises domestic grain prices as part of efforts to boost incomes of farmers but the move has widened the gap between local and international grain prices, said Ren. Overseas prices of rice, corn and wheat were between RMB300- RMB500 (US$49.54-US$82.57) per tonne cheaper than domestic prices since the second half of last year, he said.

Industry sources have said Beijing's strict scrutiny of US corn imports for an unapproved GMO strain is due to a supply glut as it seeks to curb cheap imports and support domestic grain prices. The State Grain Administration is in charge of grain imports and state grain reserves. China's cereal imports in 2013 were close to 15 million tonnes, said Ren, up from 13.98 million tonnes in 2012. Domestic stocks were at a near-record high, he said, without giving a number.

Stocks held by both central and local governments were higher than commercial stocks, with a majority of state grain stocks stored in big grain growing areas. But due to limited farmland and water, growth in grain production still lags demand, and a shift to more protein-rich diets will tighten supply in the future, Ren said. Beijing was encouraging the establishment of big grain groups and investments overseas, he said.

Meanwhile, the Chinese government will extend greater support to agriculture, including more subsidies to major grain-growing regions, vice premier Wang Yang has said.

Wang made the remarks during his visit in central China's Henan Province from Friday to Saturday, saying that policy supports will be strengthened for agricultural development and farmers' interests.

He stressed the crucial role of grain production in social and economic development, and urged more investment, subsidies and incentives for grain production and processing.

Infrastructures like water conservancy and technologies will be improved for sustainable agricultural development, Wang said. Innovative land management and land circulation will be promoted only if farmers' interests are not impaired, land use is not altered and agricultural production capacity is not damaged, He said.

Social service system in rural area to inject more strength for public welfare will be further improved, and rural financial innovation will encourage larger agricultural credit market, new rural cooperative financial institutions and stronger insurance supports.

Moreover, because of rainfall shortage, Wang warned of possible droughts in wheat-growing areas recently and demanded local authorities to prepare earlier.