February 27, 2007

 

China's grain market stable in 2007

 

 

China's grain market will operate smoothly in 2007 with periodic market fluctuation affected by seasonal rise and fall of demand and grain variety structure.

 

The country's grain output reached a record of 490 million tonnes in 2006 and is expected to maintain the same level this year with the fluctuation of less than one percent.

 

This is because farmers' enthusiasm in grain production has been aroused since early this year when the central government issued No. 1 document to expand its support in agriculture.

 

The central government has called for positively developing modern agriculture, increasing input in agriculture and subsidizing grain production.

 

However, meteorological department forecast that China would suffer water logging in its south and droughts in its north this year which could affect grain production.

 

Other factors to influence farm production include the shrinkage of grain-sowing areas by 0.3 percent this year, and China's severe shortage of water resources becomes, according to the State Grain and Oil Information Center.

 

On the other hand, China's grain consumption has gone up rapidly with the natural growth of population and improvement of people's living and consumption standard.

 

At present, the country's present grain consumption aggregate is between 495 million tonnes and 500 million tonnes. The demand is foreseen to rise one percent in 2007 as a gap still exists between production and consumption.

 

As the country had gained three-year successive grain harvests, its present grain stock is sufficient and the domestic grain supply and demand this year will maintain balance.

 

On imports, China has imported 20.68 million tonnes of grain in 2006, up 15.27 percent year-on-year, equivalent to 4.22 percent of the domestic output. Included was the import up 3.18 percent and the export down 41.58 percent.

 

The country will continuously increase grain import this year while slightly decrease its export.

 

China's import of maize, rice and soyabean in 2006 was up 1540 percent, 39.8 percent and 6.3 percent, respectively, over the previous year.

 

China's import of wheat went down 2.9135 million tonnes due to the record domestic production output in recent years and the supply exceeding demand.

 

As the country purchased 40.69 billion kilogrammes of wheat from domestic market in 2006, its import this year will continuously drop.

 

China's export of rice and wheat rose 84 percent and 328 percent, respectively, in 2006 over 2005, and will continue to rise this year.

 

The following is a chart of China's grain import and export (1,000 tonnes)

 

	2005	2006	Percent change (year-on-year)
Rice	Import-514.3	Import-719.0	Import-39.80
	Export - 672.3	Export - 1237.0	Export - 84.00
Wheat	Import - 3497.6	Import - 584.1	Import - (-) 83.30
	Export - 260.3	Export - 1237.0	Export - 328.00
Maize	Import - 4.0	Import -65.2	Import - 1540.00
	Export - 8600.8	Export - 3070.5	Export - (-) 64.30
Soya bean	Import- 26594.4	Import - 28269.9	Import - 6.30
	Export - 396.4	Export - 379.0	Export - (-) 4.40

  

Meanwhile, China's paddy sowing areas this year will go increase by 100,000 hectares this year and rice output by 6.06 million tonnes, up by 3.4 percent, according to the State Grain and Oil Information Centre.

 

The rice market is expected to maintain stable because of the strong state macro-control over the rice market and the existence of the gap between supply and demand.

 

The gross demand for rice in 2006 was 190 billion kilogrammes and the gap between the demand and supply reached 20 billion kilogrammes.

 

China's wheat prices will be stable with slight increase this year. To refrain from price hike, the state purchased more than five million tonnes of wheat the lowest purchase prices on option for seven times.

 

The state is expected to continue its lowest wheat purchase prices this year.

 

With the strong government's macro-control ability, the wheat market will maintain stable this year.

 

The year 2006 witnessed great rise and fall of maize prices. The prices in the first nine months of the year were 25.15 percent and jumped up in some areas after November.

 

According to the State Grain and Oil Information Centre, China's maize sowing areas will expand by 1.1 percent in 2007, and its output by 2.1 percent.

 

China has heavily depended on soybean imports and its domestic soybean prices are led by international market information.

 

Statistics show that the country's soybean prices have been on the rise since January this year.

 

According to US agricultural department, China's soybean output in 2007 will be 16.2 million tonnes, down 0.92 percent from the previous year. It will import 32 million tonnes, up 12.99 percent, and consume 48.1 million tonnes, up 7.99 percent.