China's grain market remains stable amid global fluctuations

China's domestic grain market has remained robust despite a drop in global yields due to lingering drought in some major grain exporters such as the United States and Russia.

This summer, China has seen a bumper harvest in wheat and rice, marking year-on-year increases of 8.4 million tonnes and 9 million tonnes, respectively, in the country's summer grain purchasing, according to Nie Zhenbang, former head of China's State Administration of Grain.

"Sufficient stockpiles and bumper harvests of wheat, corn and rice enabled China to maintain the stability of its domestic grain market," Nie said.

The total grain output in the first half of 2012 reached 129.95 million tonnes, marking a 2.8 percent jump year on year, according to China's National Bureau of Statistics (NBS).

The NBS said grain prices in July were up 3 percent year on year and 0.2 percent month on month.

Experts expect China's grain prices to remain stable during the fourth quarter despite price hikes in some other countries.

The worst drought this summer in half a century has gripped the Untied States, the world's largest grain producer and exporter.

Corn and soybean prices at the Chicago Mercantile Exchange (CME) have soared by almost 50 percent and 30 percent, respectively, since late May.

The Rome-based United Nations Food and Agriculture Organization (FAO) Food Price Index, a measure of monthly changes in the average international prices of a basket of 55 food commodities, soared 6.2 percent in July, the highest increase since November 2009, according to a statement released by the FAO earlier this month.

Experts said China has been maintaining a self-sufficient grain strategy and over 95 percent of rice and wheat has been produced domestically during recent years, which has helped the country resist the influence of global fluctuations.

China embraced an eighth consecutive year of grain production growth last year under the central government's policies to mobilize farmers' initiative to farm, such as raising the minimum purchasing price several times.

The country is anticipating a ninth consecutive year of growth this year with grain production standing at 571.2 billion kg in 2011. And the government has been attaching increasing importance to innovations in agricultural technology.

"China has shown its sense of duty by feeding 22 percent of the world's population with no more than 10 percent of the world's farmland," said Yin Xiaojian, an agriculture expert from the Academy of Social Sciences of Jiangxi Province.

DIFFICULTIES

Despite the favorable situation of China's grain market, some problems continue to threaten the country's food security, experts warned.

Xiong Guolin, the owner of a grain and oil company in Jiangxi Province, said, "We have heard that international grain prices are soaring, but we can hardly sell all of our grain."

Like Xiong, many small and medium-sized grain enterprises are facing difficulties, as cheaper rice imported from countries such as Vietnam and Pakistan have pinched their profits.

China's raising of the minimum purchasing price for grain has made many grain products more expensive than in many other countries.

From January to July, China imported 8.68 million tonnes of grains and grain powders, up 261 percent from the same period last year.

Li Guoxiang, a researcher with the Rural Development Institute of the Chinese Academy of Social Sciences, said grain imports should be dealt with in a more reasonable manner.

Properly importing grains helps stabilize domestic food prices, but excessive imports should be limited in order to protect domestic processing enterprises and farmers, Li said.

Despite the price stability of most of grain products, China has seen an increase in the prices of corn, soybeans and edible oils.

In a cereals and oils store in Jiangxi Province, soybeans and edible oils have seen slight price increases, with the price of 500 kg of soybeans rising to 3.5 yuan (0.55 U.S. dollars) from 3 yuan in July and five-liter bottles of edible oil hitting 71 yuan from 61 yuan in May.

Additionally, China has been relying heavily on corn and soybean imports.

The country is expected to produce 13 million tonnes of soybeans in 2012, while imports are expected to reach about 55 million tonnes, according to the Office of Central Rural Work Leading Group.

Moreover, China has transformed from a net exporter of corn into a net importer of corn.

Experts said that in addition to maintaining a balance in total grain production, the country should also pay more attention to the grain production structure and avoid relying excessively on imports.

Experts have also suggested that the country put more efforts into making innovations in agricultural technology and systems in order to maintain a stable increase of grain production.