Major Achievements in 2009

Record grain output may stabilize global prices

By Xin Zhiming (China Daily)
Updated: 2009-12-29 06:50

Bumper harvest will contribute to stabilizing global prices: Experts

The nation's grain output is likely to reach a record 530 million tons this year, which analysts said would help anchor global grain prices.

It would be the third consecutive year in which the country's grain production exceeded 500 million tons and the sixth straight year it recorded an increase year-on-year, according to the two-day central conference on rural affairs which concluded in Beijing yesterday.

"It's a great achievement given the severe weather conditions this year," said Ding Shengjun, a researcher with the State Administration of Grain.

The northern regions - the country's major grain production base - suffered severe drought this year. For example, Henan, the country's main wheat producer, was hit by "the most serious drought in five decades", Ding said.

The abundant harvest will help stabilize global grain prices next year, said Hu Bingchuan, economist with the Rural Development Institute of the Chinese Academy of Social Sciences.

The global market is sometimes affected by short-term factors, such as speculation and increasing demand, which lead to spikes in grain prices, but ample supply in China will contribute to stabilizing the global market, Hu said.

China is one of the many factors that influence global prices. Other factors, such as commodity prices, the value of the dollar and the demand-supply relationship in major grain producers, also affect global prices, he said.

Analysts said prices may rise next year and one of the driving forces would be the value of the dollar.

The Federal Reserve has kept interest rates close to zero and increased money supply dramatically, which will ultimately lead to the devaluation of the dollar and spark inflation.

Since most commodities are priced in US dollars, it is likely grain prices next year may maintain the rising momentum seen in the second half of this year.

But there would not be big rises, Hu said, adding that since the commodity market bubble burst two years ago, global prices have shown a trend of stable but mild growth.

Han Changfu, minister of agriculture, has vowed to keep the nation's grain output above 500 million tons next year, but cautioned against natural disasters that could thwart the goal.

But, given the country's increased input in agricultural production, Ding said it is possible to achieve the goal.

The central government decided at the Central Economic Work Conference on Dec 7 to raise the minimum procurement price for all major grain products. This follows the announcement in March that it would raise the average minimum purchase price for all grain products by 13 percent from last year.

The authorities will also increase subsidies for purchase of agricultural machinery, fertilizer and seeds, among other measures to support farming.

But even if there were a slight reduction in grain output next year, the country will not face any problem thanks to ample grain reserves, Hu said.

China's grain reserves account for about 45 percent of annual consumption, far higher than the international safety level of 17-18 percent, according to a report by Morgan Stanley.

Zhou Yan contributed to the story