October 23, 2003
Prices of All Grains Types in China Rose in Tandem for the First Time in Six Years; Change in Supply and Demand Relationship
An Exclusive eFeedLink Report
When sales of autumn grains began in Anhui province of China recently, prices rose by about 10% versus the same period last year. Since the first half of this year, prices of agricultural products throughout China have been rising, the first time in six years.
Market analysts pointed out that the recent significant changes in the supply of and demand for grains improve the momentum in sales of grains, and the industry in China is seen on a growing path ahead.
Grain prices throughout China rose in varying degree. Recently, purchase prices of rapeseed and rice in Anhui province reached RMB2900/ton and RMB1050/ton respectively, registering an increase of RMB400/ton and RMB80-120/ton respectively versus the same period last year, or a rise of about 20% and 10%.
Purchase prices of wheat in Heilongjiang hit RMB1100/ton, an increase of about 32% over the same period last year. Corn prices in Jilin rose RMB15-20/ton, while those in Hebei and Shandong increased RMB50-70/ton.
Meanwhile, the rise in grain prices also caused the prices of finished products, such as edible oil, animal feed, etc to increase. Ms Gui Meisheng, Director of Anhui Provincial Food & Grains Bureau said that the turning point of grain supply and demand in China would appear in end 2004 or 2005.
Changes in grain prices and grain supply-demand relationship in China are the inevitable consequences of changes in grain production in recent years. Various regions have generally been focusing on adjusting the industry structure, resulting in a reduction in grain production.
According to statistics from China's Ministry of Agriculture, wheat farms have shrunk by 7.5% between 2002 and 2003; this is the sixth consecutive year that wheat-farming areas have declined. As a result, wheat production is expected to drop by 4.5% compared to last year, and production volume would dip to the lowest since 1999.
Various regions of China, which are supposed for farming purpose only, have been established as development zones. Only 5400 mu of farmlands ( "mu" is a Chinese measurement unit of area, 1 mu =0.0667 hectares) around the country was reportedly to have been occupied for development purpose other than farming, while the actual figure is much higher. This has caused the accelerated decline in grain production in China.
Grain stockpiles are dropping quickly at a rate of 30 billion kilograms a year. These factors have caused the total grain production in the country to decline year after year. As a result, the relevant authorities in China are forecasting that total grain production in China could fall to below 450 billion kilograms this year.
Take Anhui province as an example, its grain production fell by 10 billion kilograms or 18% this year as compared to the previous year. Its total production could be its lowest in 12 years.
