Despite a bumper harvest last year, the prices of major grain crops, including wheat, corn and soybean, are on the rise.

 

Agriculture expert He Kaiyin, of the Anhui provincial government, attributed the price hikes to government controls and the upward movement of prices on the international futures market.

 

He said an annual grain supply of 190 million tons would be enough to secure market stability, but last year's overall grain output was estimated around 490 million tons by the Ministry of Agriculture.

 

"Since the government is the only buyer of all grain crops, a production increase doesn't necessarily lead to oversupply," said director Xiong Genquan, of the Grain Bureau of southeastern Jiangxi Province.

 

"The grain stockpile in our local government granaries stands around nine million tons, for instance, which is pretty high in comparison with the past," Xiong said. Both Anhui and Jiangxi are China's top agricultural production bases.

 

Grain price hikes in the international market have been widely viewed as another reason leading to the soaring domestic prices.

 

The lean years of wheat caused by droughts in the United States and Australia have provoked sharp price spikes in global grain futures. As China continued to be a net importer of grain, its domestic price could hardly remain immune from fluctuations in the international market, analysts said.

 

After the government called for the development of bio-energy, corn, a major raw material for fuel ethanol, saw a rising demand.

 

Estimates of the Dalian Commodity Exchange and the National Grain and Oils Information Center put the gap between domestic corn output and demand at 3.5 million tons in the five-year period from 2006 to 2010, turning China from a net corn exporter to a net importer.

 

Some experts contend that with the tightening of government controls over arable land and the improvement of farming technology, China has great potential for further production increases.

 

Since Nov. 25, the government has allowed increases in the supply of grain by releasing some of its national stockpile to offset price jumps.

 

(Xinhua News Agency January 10, 2007)