Floods, Global Wheat Price Hikes not to Affect Grain Prices in China

A rise in international wheat prices and a string of natural disasters this summer would not exert significant pressure on China's grain supplies during the remainder of the year, given the country's large grain reserves as well as government measures to stabilize food prices, experts said Thursday.

Zhang Zhenghe, professor at the China Agricultural University, said on the sidelines of the ninth China Changchun International Agriculture and Food Fair that China's grain supplies would not be significantly affected by the drought in Russia and recent floods in some of China's grain-growing regions.

"China is largely self-reliant in grain production, as its imported grain accounts for only 5 percent of the total consumption per year," he said.

Global wheat prices climbed sharply in recent days, pushed up by record-setting heat and drought in Russia, the world's third-largest grain exporter.

Worries over food supplies were heard after Russia announced on Aug. 5 that it would ban grain exports because of the drought.

However, statistics from China's Ministry of Agriculture showed the country imported 845,000 tons of wheat in the first half of the year. As this compares with China's annual wheat output of 110 million tons, the proportion of imported wheat is small.

"I don't think Russia's ban on wheat exports will boost domestic wheat prices because China's wheat market is a relatively closed one and the country has diversified channels for wheat imports. Apart from Russia, China also buys wheat from the U.S. and Australia," said Li Guoxiang, an agricultural analyst with the Chinese Academy of Social Sciences.

China suffered a string of natural disasters this summer, including a massive mudslide which hit Zhouqu County, northwest China's Gansu Province on Aug. 8 and killed 1,287 as of Wednesday.

A devastating flood in Jilin, China's main grain-growing region, affected at least 1.25 million hectares of crops and caused 45 billion yuan (6.6 billion U.S. dollars) of damage.

"Despite a drop in the summer grain output this year, China had six years of bumper harvests running to 2009. Its grain inventory is far above the international warning level," Zhang Zhenghe said.

Ji Jianping, deputy manager of Dacheng Group, Asia's largest corn processing company, said he was not worried about obtaining supplies because China has sufficient reserves.

The Chinese government also worked to avert price hikes in agricultural products and clamp down on speculators who force up prices of farm produce such as mung beans and garlic.

The central government Wednesday ordered the expansion of vegetable production, with increased funding and rail links, in a move to stop an "increasingly serious" food supply situation in some major cities.

Further, it ordered local governments to stabilize and expand vegetable farms in the suburbs of large cities with minimum planting areas, and to set up vegetable reserves to meet demand for five to seven days in large cities like Beijing and Shanghai.

"The central government's move will help stabilize food prices and ease public expectations of higher inflation," Zhang said.

Boosted by rising food prices after widespread floods, China's consumer price index, the main gauges of inflation, rose to 3.3 percent year on year in July, its highest level since October 2008 and exceeding the 3-percent full-year target the government set in March of this year.