November 17, 2008


China to raise grain prices to international levels

China will increase domestic grain prices to international standards next year to encourage more agricultural production, according to an official in a top planning body.

Aside from raising grain prices, the National Development and Reform Commission (NDRC) will also increase subsidies for agricultural production materials such as machinery and crop seeds, said a report by Xinhua news agency.


Next year when new grains enter the market, the minimum purchasing price for white wheat will be RMB 0.87 per 500 grammes, up 13 percent from 2008 prices, while prices for red and mixed wheat will be RMB 0.83 per 500 grammes, up 15.3 percent, said Zhang Xiaoqiang, vice chairman of the NDRC.


International grain prices have surged since 2005, and peaked this past summer, although important commercial commodities have now declined due to global bumper harvests and the financial crisis, said a recent report from the Economic Information Daily.


Import costs of grains from the US on November 5 were in line with the domestic market, but it is important for China to move closer to overseas grain prices, said Zhang.


Although international market grain prices are high, China's grain producing provinces are having a torrid time.


Key grain producer Henan Province produces 10 percent of Chinese grains with 6 percent of farmland. The harvest provides 30 billion jin (one jin equals 500 grammes) of raw and processed grains per year. However, the 2007 fiscal incomes for 70 counties, which produce 81 percent of Henan's grain output, accounted for 19.1 percent of the province's fiscal income.


The fiscal expenditure of 52 domestic counties or cities that can produce 1 billion jin of grain each, was less than one-third the average domestic standard.


While domestic grain prices have fallen behind international prices, unlike the prices of agricultural productive materials, particularly for fertilisers.


Production material prices have rose 40 percent on-year in the first half of 2008, said Wan Xiaohu, vice-head of Hua county in Henan province.


The price of carbamide has increased to RMB 120 from RMB 90 per bag, while prices for fuel and pesticides have also increased, said Wan.


The NDRC has released a national grain plan that targets production of at least 500 billion kg in 2010 and more than 540 billion kg in 2020.

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