November 26, 2010

 

China pushes for more crops to ease shortage

China's government is pushing farmers to plant and produce many more vegetables in the coming months in its efforts to boost supplies and rein in the recent surge in food prices, officials said Thursday (Nov 25).

 

The government plans to raise vegetable acreage by 7% and vegetable production by 7.5%, said agriculture minister Han Changfu. The increase would follow almost three years of little to no growth in this farming segment.

 

The new target is more than double the 1.8% growth in vegetable acreage in 2009 and would be a 3.3% increase from 2008, according to sources.

 

The new measure targets the surge in vegetable prices, which this year has doubled for such produce as ginger and garlic, while grains have posted smaller increases. Corn prices, for instance, have risen a relatively modest 30%-60%.

 

"We should provide important support to those agricultural products with a large supply gap, and increase these products' production and processing capacity in order to boost market supply," Jiang Dingzhi, a vice-chairman of the China Banking Regulatory Commission, said separately Thursday, as he urged banks to lend more to the agricultural sector.

 

Some food prices have fallen in the last two weeks after the rash of tightening measures, a development that has helped the government claim an early victory.

 

"The reasons for the rapid decline in futures was, first, the State Council issuing its notice on stabilising prices to protect basic livelihoods, and second, the sharp decline in global commodity prices," the commission said Thursday, citing declines in global zinc, soy and corn prices.

 

Still, agriculture prices have fluctuated this year in response to a range of factors including drought conditions in the Black Sea and lower yield projections in the US; Chinese demand is just one variable, albeit large, swing factor.

 

The National Development and Reform Commission (NDRC) continued to rail against speculators and hoarders for actions it says have been driving up food prices. "It's important to attack malicious hoarding, price escalation, collusion and severely crack down on speculation to ensure the orderly trade in grains, cotton, sugar and other agricultural products," it said in a statement.

 

The State Council said last week that price controls may be applied if necessary on downstream food products, diesel and fertilisers, potentially reviving a drastic policy not seen since inflation hit a 12-year high in early 2008.

 

Still, price controls are a controversial measure, since they have in the past led to shortages. "The government has to aim for moderate prices rather than volatility, and has to be mindful of low-income households as well as cater to farmers, so it won't impose controls on upstream grain products," analysts said.

 

Chinese grain output has been closely watched this year, especially after the autumn grain harvest fell 0.6% on-year, as Beijing strives to feed a growing population amid rising demand and slower increases in yields.

 

The government may be facing a tougher job managing prices in coming months, as its vaunted agricultural reserves have been dwindling.

 

Grain stockpile authorities have been selling millions of tonnes of corn, wheat and rice since the middle of this year to stave off price increases, and have recently added edible oils and soy to its slate of regular state auctions.