October 4, 2011


China expects higher grain prices despite bumper crop



China will still face moderate grain price hikes this year despite the country's upcoming bumper harvest, a senior agricultural official said.


Grain output is expected to jump to a record high of more than 550 million tonnes, marking the eighth consecutive year for increased production, said deputy agriculture minister Chen Xiaohua.


"Prices will go up moderately due to higher farm costs, as well as the impact of international markets. But the rise will be limited," Chen said.


The current price rise does not mean the country is suffering from a shortage of grain, he said, adding: "China did import an increased amount of corn last year, but it was mainly due to a price differential that made corn imports attractive."


Official customs statistics show corn imports fell 26.2% from January to July this year compared with the same period last year.


"We can basically satisfy the domestic market. Facing the increasing need for corn in the future, the government will make more efforts to balance supply and demand," Chen said.


Since 2007, China's annual grain output has remained above 500 million tons, hitting 546.4 million tonnes last year, according to the National Bureau of Statistics.


More than 70% of total grain output increase this year is expected to come from Northeast China due to favourable weather conditions, he said.


Chen also said this year's harvest of autumn grain would be good because of expected growth in per-unit yields and enlarged planting areas.


Autumn grain output always accounts for 70%-75% of China's total grain output. As of Monday, about 21.3 million hectares had been reaped, 27.6% of the total autumn grain planting area, ministry statistics show.


Meanwhile, the National Development and Reform Commission, the nation's economic planner, recently announced it will raise the minimum purchase price for wheat from farmers in 2012.


"The move aims to protect farmers' enthusiasm to grow grain and further stimulate production," Chen said.


Lu Bu, a researcher in agricultural resources and regional planning at the Chinese Academy of Agricultural Sciences, said that improving the contribution made to grain output by farmers in South China is very important to the future growth of grain output.


"The risk of decreased output is looming, as grain production capacity is now too concentrated in northern areas. When natural disasters hit those areas, the impact will be great," he said.


"The central government needs to encourage farmers in southern areas in crop production, as many of them now prefer to work in the cities for more money, instead of spending time on the land," he said.