Saturday, September 25, 2010

NDRC grain comments

In comments at a press conference on September 14, Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, emphasized China's resolve to keep its grain markets insulated from the world market. While soybean imports continue to soar, Zhang's comments suggest that the leadership intends to keep imports of rice, wheat, and corn at minimal levels. Look for China's corn imports to dry up soon if this fall's corn harvest is good.

Vice Chairman Zhang said, "Currently, the country's grain supply and demand are in we can be assured that no big fluctuation in grain prices will occur." He said this summer's grain harvest is about the same as last year's, and the fall grain harvest will be a little higher. If there are no major natural disasters, China should have an increased grain harvest for the seventh year in a row.

Zhang emphasized that grain reserves are very high and the ratio of inventories to consumption is far above the internationally recognized "safe" level of 18%, large enough to influence domestic prices.

Regarding international price fluctuations, Zhang stressed that there is little relationship between domestic and international grain markets. Apart from soybeans, China's imports of wheat, rice, and corn are less than 1% of domestic production. Since grain needs are met domestically, Chinese grain prices are not affected by international price fluctuations.

Mr. Zhang said China's grain security faces severe challenges since demand for grain is rising as population grows and living standards rise, production growth is constrained by various factors, and there is limited scope for using the international market to fill deficits in the domestic market. Related departments need to continue strengthening monitoring and analysis of grain markets, do a good job in putting grain reserves into the market, increase monitoring and supervision of markets, and stabilize prices.

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