February 9, 2009

The drought in north China will not drive up grain prices in the second half of 2009 due to falling international prices, and bumper harvest and high stockpile in the last crop year, an expert said.

The drought had affected 24 million acres of wheat in China's key producing areas involving production capacity of about 51.1 million tonnes, as of February 4.

China's 2008 wheat production was forecast at 112.5 million tonnes, with the wheat output in the affected areas representing 45 percent of total production last year.

However, policy support is expected to hold firm grain prices, and China has increased the minimum purchase price of new grain by about 15 percent for 2009 to ensure the stability of the wheat market.

So far, China has allocated RMB400 million (US$58.5 million) for subsidies on irrigation and fertilization, and has taken emergency measures to fight the drought.

China purchased 45 million tonnes of domestic wheat for reserves last year, and the global economic downturn will keep grain prices in downward trend in the next several months or a longer period of time, said Jin Bosong, a researcher with the Ministry of Commerce.