China grain prices to rise despite bigger harvest

AP News
Posted: Sep 29, 2011 2:34 AM

China's grain harvest will post its eighth consecutive increase this year but consumers will still face moderate price rises as supplies struggle to keep pace with growing demand.

There is global interest in China's grain harvests because a failure to satisfy domestic demand could force the country to import some grains, driving up already volatile world food prices.

China will produce more than 550 million tons of corn, rice and other grains this year _ the eighth consecutive year of increased output, said Chen Xiaohua, deputy director of the ministry, at a news briefing Thursday in Beijing.

Government subsidy programs that guaranteed farmers would be able to sell their grain were to thank for the harvests, he said, and also credited generally favorable weather despite a harsh drought in the southwest that affected output there.

He said moderate price hikes for grains were still expected due to higher farm costs, growing meat consumption which is driving up demand for feed grain, and international market forces.

"Grain prices will go up moderately due to rises in the cost of production but the rise will be limited," Chen said, without giving specifics.

China's inflation rate hit 6.2 percent in August, driven by a 13.4 percent jump in politically sensitive food prices. That was down from July's 14.8 percent, but still uncomfortably high for a society where the poorest families spend half their incomes on food.

An early spring drought in China's northeast had sparked international concern, and excitement among grain traders, that China could tap the global market for additional wheat or corn.

Chen didn't comment specifically on wheat but said corn yields were up and imports had fallen.

"Last year China did import some corn from abroad but that was mainly due to a price differential that made corn imports attractive," Chen said. He cited customs figures that showed corn imports fell 26.2 percent during the January-July period this year compared to the same period in 2010.

"We can basically satisfy the domestic market," he said. "There is increased need for corn though so we need to make great efforts to balance supply and demand."