China sees grain supply pressure
Updated: 2008-04-05 10:28

Beijing saw the third rainfall of this spring on Tuesday morning, but the shower did little to relieve the city's thirst - and economist Wen Tiejun's worries.

As Chinese meteorologists forecast on Tuesday the worst drought in five years will continue in north China, including the capital, Wen told Xinhua the pressure on the grain supply is rising in China, with or without droughts.

"China is feeling a rising pressure to grow enough grain to feed its population," said Wen, head of the School of Agricultural Economics and Rural Development at the Renmin University of China.

It was an inevitable fallout of lower returns in rural production than in industrial sectors as the country is in the middle of industrialization, said Wen.

Although China saw a fourth consecutive rise in grain output last year that met over 95 percent of domestic needs, Wen noted it's getting harder to maintain the balance.

"Rural Chinese have been turning away from their lands as they can increase their income three to four times by working in cities," he said.

Actual proceeds dropped from 382 yuan ($54.3) to 320 yuan between 2004 and 2006 for growing each mu (a fifteenth of a hectare) of grains, dampening farmers' enthusiasm for raising grain production, according to vice agricultural minister Yin Chengjie.

Rapid industrialization has seen hundreds of billions of yuan flow out of the countryside each year, while appropriation of arable lands has not been effectively checked, both adding to the grain production pressure, said Wen.

Meanwhile, demand has expanded as a yearly average of 15 million rural laborers moved to cities, needing an extra 4.5 million tonnes of commodity grains each year, said Yin.

Official statistics show that over the past decade, China's population increased by 90.59 million and per-capita grain supply decreased from 412 kg in 1996 to 378 kg in 2006.

The country's grain output exceeded 500 million tonnes last year, 15 million tonnes less than the total demand, as official figures show.

Chinese Premier Wen Jiabao said in a national videophone last week the government should give "clearer, straighter and stronger signals to mobilize and protect the initiative of farmers to plant crops."

The State Council, or the Cabinet, decided last Thursday to spend another 25.25 billion yuan in addition to this year's rural budget, mainly to subsidize farmers' purchase of seeds, diesel, fertilizers and other production materials.

The Ministry of Finance has rushed to pay out 63.3 billion yuan of subsidies to farmers ahead of schedule to make the money available in the coming spring plowing season.

The government raised the lowest state purchasing prices for rice and wheat last week, the second such move since February.

"Subsidies combined with protective purchasing prices proved effective in addressing the conflict between grain growth and farmers' pursuit of higher income," said rural policy researcher Li Chenggui with the Chinese Academy of Social Sciences.

But the effect would be limited if small-scaled, scattered crop planting continues to restrain agricultural growth, he said.

China has vowed to find a long-term solution to close the rural-urban gap, increasing rural input and sending farm experts to boost agricultural productivity.

Despite the supply pressure, China is relatively immune to soaring global rice prices and a world grain strain as it remains self-sufficient at present, said Li.

Wen said China's rice supply and demand were basically balanced, while the gap between domestic and international prices was not big enough to stimulate large export rises that could cause shortages.

Customs figures show China exported 9.86 million tonnes of grains (soybeans excluded) last year, but imported only 1.55 million tonnes.

The country has vowed to strictly control grain export to ensure domestic supply and fight inflation, abolishing tax rebates, levying temporary duties and imposing quotas on the export of some grain products like rice and wheat.

The price for Thai medium-grade 15 percent broken rice, a benchmark for the international market, has more than doubled in the past three months. Several rice exporting countries, including Vietnam,Philippines and Cambodia, have recently stopped or cut exports.

Figures from the Food and Agriculture Organization of the United Nations show global food prices surged 40 percent last year while world grain reserves will drop to a two-decade low this year.

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