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China sees grains supply tight, little exports

“China’s grain supply will be in a tightly balanced situation in the long term.”

– Zhang Xiaoqiang

China’s grains supply will stay tight for the foreseeable future, a top planning official said Nov. 13, with little chance of a return to large-scale shipments despite moves to lift export restrictions.

Only “small” amounts of exports may be possible next year following a near-total ban in 2008, Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, told reporters.

“China’s grain supply will be in a tightly balanced situation in the long term. We have no plans for a large amount of exports in the future,” Zhang told reporters at a press conference.

Zhang spoke at the release of the country’s program for medium-and long-term grain security, which was approved by the State Council, the cabinet, in July.

According to the plan, China’s grain consumption is expected to rise to 525 million tonnes by 2010, and 572.5 million tonnes by 2020, staying just ahead of targeted production at or above current levels of 500 million tonnes next year, rising to 540 million tonnes by 2020.

Corn is expected to be particularly tight in the long term, while the country remains more confident in its ability to supply wheat and rice, the plan states.

Taxes scrapped

China had pushed up tariffs on a range of commodities this year as it looked to lock in supply during a surge in international prices. But it said Nov. 12 it would scrap taxes on some grains, which had kept Chinese domestic grains and flour prices well below international levels for most of 2008.

The tax change has caused speculation that Beijing was moving to encourage overseas deals, a move that could put more pressure on global corn prices that have halved since July. China used to be the world’s second-largest exporter.

Zhang said the commission was studying the proper amount of exports for next year.

“China has kept a small amount of grain exports over past years, which included rice, corn and wheat, but the amount was at a small scale and accounted for only two per cent of global cereal trade,” he added.

Weak domestic corn demand coupled with a record harvest this year could lead to a large surplus, which may pressure domestic prices.

After the fall of U. S grain prices, Chinese grains were no longer competitive in the international market, unlike in the first half of the year.

State secret

China’s grain plan also calls for central and local grain reserves to be maintained at a reasonable level, with wheat and rice stocks not below 70 per cent of total reserves, increased rice and soybean stocks and replenishing edible oil reserves.

China regularly purchases and releases its grains reserves, to guide domestic prices, but the exact levels and makeup of the reserves are a state secret so it is often difficult to tell what the government is doing.

Corn levels were believed to be relatively low in the past few years. China expanded the state reserves mandate to include soybean and edible oil reserves in 2008.

The national plan calls for China to remain self-sufficient in rice and wheat, and “basically self-sufficient” in corn, an aim that is threatened by shrinking farmland and water shortages.

Zhang said the country has no plans to develop farmland overseas in securing food for the world’s most populous country, but will do its utmost to keep its own grain acreage stable.

The government will increase subsidies for grain farmers and grain prices in “a gradual way” every year to narrow the widening income gap between its urban and rural populations and keep farmers on fields.

Feed demand

Grain traders have been anticipating China’s emergence as a net corn importer, but so far good weather, improved yields and restrictions on exports have staved off the need for imports.

Feed consumption is expected to rise to 187 million tonnes by 2010, or 36 per cent of total grain production, while meat production is seen to rise to 71.4 million tonnes from 68 million tonnes last year, according to the national plan.

The country is basically in balance for rice and currently has a surplus of wheat, although some high-quality wheat may need to be imported, the plan said. It will continue to depend heavily on imports of soy and edible oils.

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