Tuesday, August 31, 2010

We have lots of grain but we need more

Chinese officials are sending mixed messages regarding the grain situation. Everything is OK but we have to work hard and hope new seeds and science will magically increase production.

A "voice of China" broadcast transcribed on the MOA website tries to dispell concerns about short supplies and rising prices.

The Minister of Agriculture, Chen Xiaohua, said that there have been extraordinary efforts to alleviate the effects of this year's natural disasters (drought in the southwest, freezes in the spring, flooding this summer) with clear results.

Nevertheless, he says everyone needs to work hard to make sure the fall grain harvest is a good one. China has to achieve grain production of at least 500 million metric tons every year.

Not that he's worried about the harvest. He says grain area is up this year and the crops are on a generally good trend.

Minister Chen reminds us that China has had six straight years of increases in grain production. In view of China's national conditions (no scope for increasing land area), he says the country has to rely on science and technology. S&T has accounted for exactly 51% of agricultural [production?] increase in recent years. Good quality seeds accounted for 40% of increased grain production.

Still, there's a lot of work to be done. Chen says there are research problems to be overcome in good quality seeds and extension work needs to be improved. It's necessary to raise the scientific level of farmers' planting and rely on "new-style" farmers. He makes an opaque reference to "improved law" which may refer to better intellectual property protection.

The article then turns to the issue of rising grain prices. It says the average price of rice, wheat, and corn is up 12.3% this year. But the vice chairman of the National Development and Reform Commission declares there will be no big increase in Chinese grain prices in the second half of the year.

The vice chairman assures us that--due to the 6 consecutive big harvests--China has plentiful grain stocks equivalent to 40% of annual consumption. And this year "conditions are generally good." Moreover, the government has taken measures to cool the market, including auctioning off grain reserves and cracking down on hoarding. He says the grain prices stabilized since June.

But then the vice chairman tells us that rising grain prices are not a bad thing because they increase farmers' incomes and encourage them to plant grain.

But we don't want prices to increase too much (sorry farmers). When queried about the effect of rising international prices on China, the vice chairman is dismissive. He reminds us that China remains mostly self-sufficient in wheat, rice, and corn, importing only about 1% of needs. Therefore, the rising international prices will not affect the China price in a major way.

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