March 11, 2011

 

 

The stability and security of China's grain supply are "guaranteed," as the nation expects a larger overall grain harvest this year and grain reserves are sufficient, Agriculture Minister Han Changfu said Thursday (Mar 10).

 

Concerns have been raised about the country's wheat supply this year due to a prolonged drought that affected production and a sharp drawdown of national and provincial reserves through a series of auctions designed to contain inflation.

 

A combination of increasing prices in the international market, high domestic inflation expectations, rising production costs and strong demand has pushed grain prices higher, but further increases will be restrained, Han said.

 

"Grain prices will rise moderately this year, I don't expect to see sharp rises," he said.

 

The central government sold a record volume of grain from reserves last year, accounting for about 15% of demand. The sales included 43.29 million tonnes of wheat, 27.45 million tonnes of corn and 13.43 million tonnes of rice.

 

Corn prices in major producing areas have risen by around 5%-6% since the Lunar New Year holiday in early February, while wheat prices are up about 5%.

 

"Recent increases in grain prices aren't the result of supply problems," Han said, but he admitted that "drought conditions have affected China's wheat production."

 

Han said previously that the government would prevent unreasonable and dramatic price increases but would allow reasonable rises to ensure supply, amid citizen complaints over rapid food price increases and a lack of interest in planting among farmers due to low income.

 

"We can ensure a bumper harvest of wheat this year," he said, citing the effects of the government's drought-relief efforts and of the snow and rain that fell around the end of last month.

 

The government is also controlling the use of corn in non-food and non-feed processing, he said, supporting the view by Bao Kexin, general manager of China Grain Reserves Corp, who said the government should "resolutely" control the expansion of alcohol and starch industries that use corn in the manufacturing process.

 

China consumed about 40 million tonnes of corn for production of starch and alcohol last year, accounting for about 25% of total output, industry analysts estimated.

 

China's grain output rose 2.9% to 546.4 million tonnes last year, marking the seventh consecutive year of growth.