February 16, 2011

China's drought-fighting efforts, stockpiles mitigate impact on world grain prices

China is working to minimise the impact of a drought on its wheat crop, and its big grain stocks mean there will be no effect on world prices, China's Foreign Ministry said Tuesday (Feb 15).

"Everyone is paying great attention to China's recent drought, which may have a certain impact upon winter wheat, but relevant departments are taking proactive steps and will try their best to reduce the impact as much as possible," said foreign ministry spokesman Ma Zhaoxu.

"China has had seven successive years of bumper harvests and stocks are sufficient for domestic demand so (China) will not have any effect on international prices," he said, adding that the country's imports account for very little of global grains trade of no more than 5%.

Chicago Board of Trade wheat for March delivery fell 0.2% on Tuesday as the market took a breather following two straight sessions of gains on robust demand from key buyers in Africa and the Middle East that, along with crop concerns in China, drove prices to a 2.5-year top last week.

China's drought has caught the attention of investors globally after natural disasters in Russia and Australia and poor crop conditions elsewhere threatened to decimate supply, while strengthening demand and abundant speculative cash helped to pump up prices over the past six months.

Chinese officials have repeatedly said China's grain supply and demand are basically balanced, though many traders are asking if the drought could push China towards wheat imports.