Initial price hike in six years augurs a grain shortage peak in 2005

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Last updated at: (Beijing Time) Wednesday, October 29, 2003

Initial price hike in six years augurs a grain shortage peak in 2005

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Experts warned at the 4th China Forum for Grain Market-oriented System that the first grain price hike in six years signals a grain shortage to come in China and that the inflexion point may come to show in around 2005.

Prices of wheat, corns, rice and other staples soared high in a short period

From Oct. 16 to 19, the wheat price in major wheat growing areas experienced a sudden sharp price increase of 40 to 80 yuan/ton on average. The upward grain prices immediately brought high the prices of processed farm-products, such as flour, rice, edible oil, and feedstuff. It is the first time that a sweeping price hike like this has ever happened in such a short span of time since 1997 in China.

Supply-and-demand behind the price

When the grain output hit its record high at 512 million and 295 thousand tons in 1998, supply surpassed demand and grain prices remained low for a long time, said Li Jingmou, a grain expert and president of Zhengzhou Grain Wholesale Market in Henan province, central China at the forum. Since 1999, the grain output had decreased year-on-year and 2001 saw an added-up decrease of 59.65 m. tons. The year 2003 has witnessed a simultaneous downward tendency for the output of three major crops. The severe flood that plagued in autumn has seriously affected the wheat sowing in north China. Department concerned predicted that this year may see the national gross grain output plummet below 450m tons.

International grain market fluctuation influences domestic market

The global gross output of three types of crop, namely wheat, cereals and unhusked rice, was estimated at 2.031b tons for 2002/2003, 63.3m down from the previous year, a decrease of six successive years. In the meantime, the biggest rise of grain prices in seven years has come to show too.

"A new round of grain shortage may come soon. The inflexion point may be in around 2005. However, it may be brought about a bit earlier should there be anything unforeseeable." According to Li Jingmou.

(Article from China Economic Times and trans. by PD Online staff member Lijia)

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