China able to guarantee corn supply as supply, demand balanced: official

China is able to guarantee corn supply because supply and demand of the grain are balanced, and because market fundamentals are not conducive to price surge in the second half, a senior Chinese grain official said Wednesday.

Zeng Liying, deputy director of the State Administration of Grain (SAG), made the remarks in a speech at the fourth International Corn Industry Conference, which opened here Wednesday in Dalian, a port city in northeast China's Liaoning Province.

Zeng stressed China is capable of self-sufficiency in food.

"Grain demand and supply is basically in balance in China," she said. "We have sufficient supply, or some surplus, of wheat and other food staples, except for soybeans."

According to the data released by the National Bureau of Statistics (NBS) in July, China's summer grain output -- which accounts for about one quarter of the country's annual grain production -- was 123.1 million tonnes this year, down 0.3 percent, or about 400,000 tonnes, from a year ago.

The slight reduction in summer grain output increased the pressure on China's autumn agricultural production.

"Despite a few uncertainties in the autumn grain production, we managed to increase the area of land under cultivation," Zeng told the conference which attracted more than 200 officials, grain producers and dealers from home and abroad.

"I hope we will have a good autumn grain harvest this year. I hope there will be no major natural disasters," she said.

As for corn, supply still exceeds demand in China, as corn production has stabilized in recent years, Zeng said when commenting on the surge in corn prices in recent months.

According to SAG figures, corn prices increased rapidly from March to early May before dropping somewhat in late May after the Chinese government strengthened macro-control of the corn market to curb speculation.

But the corn prices started increasing again in June and broke through the 2,100 yuan (about 312 U.S. dollars) per tonne level in August on speculation Chinese inflation will accelerate.

"We have abundant corn reserves from good harvests in 2008 and 2009," Zeng said, "so there there is no problem for us to supply the market."

The world's major corn producer and consumer, China produced a record 165.91 million tonnes of corns in 2008 and 163.97 million tonnes in 2009.

The record production prompted the government to raise the country's corn reserves to 36 million tonnes to absorb the excessive supply, according to the SAG data.

According to the SAG data, China consumed 148.35 millon tonnes of corn in 2009, 15.62 million tonnes less than the annual output of the year.

Zeng attributed the increases in the price of corn in the first half of this year to multiple factors: rising planting costs; increased demand for animal feed; anticipated reductions in output; natural disasters like floods and drought; and a reduction in exports from major corn-producing countries.

"A mild increase in the price of corn is reasonable and is good for corn production and farmers," she said. "But any sharp rise in the price is abnormal and needs to be prevented."

"Moreover," she added, "we are hopeful for a good harvest this year, too. Market fundamentals do not support any upward surge in prices."

The official said the government will sell part of its corn reserves on the wholesale market to put downward pressure on prices while severely punishing speculators.

Zeng estimated China's imports of corn will remain at a relatively low level this year and won't impact the domestic market in a significant way.

According to customs data, China imported 282,000 tonnes of corn in the first seven months of the year.

Source: Xinhua