April 5, 2004

China's Soybean Acreage Seen Losing To Rice
 
Chinese soybean acreage in 2004 is unlikely to increase significantly despite soaring prices, as Beijing focuses on more rice acreage to ensure a bigger grain harvest, analysts in China said Friday.
 
In contrast, industry analysts in northeastern China predicated in early March that domestic soybean acreage could jump by at least 10% this year, due to high market prices.
 
Farmers in northeastern China, the top grain and soybean producing region, began preparations for spring planting this week. But the government's efforts to boost 2004 rice production seems to have stolen the spotlight from soybeans and caused more farmers to think twice about their decisions, analysts said.
 
Earlier this week, Beijing set the minimum procurement prices, or MPP, for early paddy rice in 2004 at RMB1,400 ($1=RMB8.277) a metric ton this year. State-owned companies would buy rice from farmers when the market price is under the MPP.
 
Rice markets in China rebounded strongly this year, setting fresh eight- year highs in March, luring more farmers to plant rice. "The prices of locally produced soybeans are very good, indeed. But farmers will respond to the calls of the government, because if you plant rice, you are sure to get the good prices guaranteed by government," a grain market analyst from Harbin, Heilongjiang said Friday.
 
He forecast China's soybean acreage is likely to stay flat or only slightly above last season because of competition for acreage from rice.
 
China's 2004 soybean acreage is seen at 9.48 million hectares, 0.9% lower than the acreage of 9.57 million hectares in 2003, according to the figure from a government-backed grain think tank, traders said. Assuming normal weather conditions, Chinese farmers could still harvest 17.20 million tons of soybeans, 4% higher than that in 2003, according to the grain think tank, traders said.
 
Comparatively, China's rice acreage is forecast to rise by 4% to 28.23 million hectares. The rice production this year is forecast to jump by 7% to 177 million tons, the first rise of output after felling for six consecutive years, according to the think tank. 
 
Local governments in northeastern China made it a priority to produce more rice in 2004, to ensure that the major consuming regions in Beijing, Shanghai and Tianjin have enough food, said the analyst from Harbin.
 
"Premier Wen Jiabao told our governor that Heilongjiang is the great grain barn for China during the National People's Congress in March," added the analyst, citing a story from the from official Xinhua News Agency.
 
While China's government doesn't have the same control over grain production as it did, its influence remains, said another market analyst in Beijing.
 
Early this week, China's central government allocated a fund of CNY940 million to subsidize better quality rice seeds for seven rice-producing provinces, including Heilongjiang, Jilin and Liaoning.
 
The seed subsidy fund will go directly to the rice producers in an effort to boost rice acreage and production, according to the official Xinhua News Agency.