Summer harvest becomes focus amid inflation expectation

Updated: 2010-05-13 11:30
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JI'NAN: All this month, Li Jirui has been busy working his wheat crops, spraying pesticide to ward off diseases and insect pests.

Despite growing crops for 30 years in Tengzhou city, Shandong province, one of China's main grain production areas, he is uncertain of his harvest this summer.

It's still too early to judge the effects of the extreme weather that has plagued China since November.

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"From now till June, it is essential to tend the crops carefully to ensure a good harvest," Li said.

The State Council, China's Cabinet, was cautious last month, citing "tremendous difficulties" for agricultural production due to persistent cold weather in the north, severe drought in the southwest and snow in Xinjiang and Inner Mongolia.

The spot and futures markets are anxiously waiting to learn the summer grain output, which accounts for about a quarter of China's annual food yield, as inflationary pressures are increasing.

China's April consumer price index, a main gauge of inflation, rose to a new high this year, up 2.8 percent from a year earlier.

First quarter statistics from the National Development and Reform Commission showed average grain purchase prices rose by more than 12 percent and further hikes are expected.

Bai Meiqing, president of China National Association of Grain Sector (CAGS), said the existing inventory was enough to guarantee a stable market, but prudence was needed for the rest of the year.

"China's food market has entered a new era of short supply and we should never let our guard down concerning food security," Bai said.

China's summer grain output rose six years in a row to top 123.35 million tons last year, 2.6 million tons more than the previous year. Grain output reached 530.8 million tons in 2009, the sixth consecutive year of a growth in grain yield.

The central government last month unveiled funding plans worth more than 2.4 billion yuan ($352 million) to ensure summer grain and oil output as extreme weather across China threatened harvests.

Qin Qingwu with Chinese Association of Agricultural Economics said a good harvest of summer grain would help stabilize price expectations as demand was steady.

According to the Ministry of Agriculture, the "bottom line" is an annual grain output of 500 million tonnes for China's 1.3 billion people.

"The planning lies with man, but the outcome with Heaven," said Li, the wheat farmer in Shandong.

"If we work hard and God helps in the 40-day maturing period, we can still be hopeful of a good harvest this summer," he said.