Despite the drought that has wrought havoc this year, the country is set to reap a bumper summer grain harvest and see its price stabilize, analysts have said.
China will harvest more summer gain crops this year than last despite many adversities, such as drought, frost and insect pests, Minister of Agriculture Sun Zhengcai said during an inspection visit to north China's Hebei Province over the weekend.
Summer crops normally account for 20 percent of China's annual grain output. Wheat accounts for 90 percent of the summer grain crops.
As supply increases, prices are expected to go down. But given the government's effective regulation of the grain market, prices will not fluctuate much in the wake of the summer harvest, Li Chenggui, a researcher with the rural development institute of the Chinese Academy of Social Sciences, said.
China will continue to apply its minimum grain purchase price system this year, which will prevent the prices from falling dramatically, Li said.
"Last year, the system contributed 4.5 billion yuan (US$590 million) toward farmers' incomes," he said.
Since late last year, however, urban communities have been worried about rising grain prices and the trend has continued until today.
The crops that have seen their prices rise most are wheat and corn. The former is thanks to the market-stabilizing measures of the State through the China Grain Reserves Corp (Sino Grain) while the latter was caused by the jump in demand as a result of the soaring industrial processing of corn.
Corn price rises will put much pressure on the stock-raising industry and increase the price of meat, Guo Qinghai, an agricultural professor at Jilin Agricultural University in northeast China's Jilin Province, said.
"The State must step in to stop it."
The State has stopped approving new projects which use corn for making ethanol.
"If the government strictly controlled the industrial use of grain, the normal demand level would not lead to continuous price rises," Li said.
For wheat, Li said, the State can adjust market supply as it chooses because it holds the bulk of the crop through Sino Grain.
(China Daily June 18, 2007)