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US drought spikes grain prices

By Song Shengxia  (Global Times)

08:31, July 20, 2012

China's grain prices are likely to rise, leading to a rebound in consumer inflation, after global grain prices soared because of a drought in the US, analyst warned Thursday.

The ongoing drought in the US, the largest grain producer in the world, would drag down US grain output and thus global grain supply, driving up grain prices on the international market, Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant, told the Global Times.

Even if the rise of the prices on the international market stabilizes at 20 percent, the increase of consumer prices caused by rising international grain prices will push up China's consumer price index (CPI) by between 0.7 and 1.5 percentage points, thus causing a rebound in inflation in a short term, he said.

The US is hit by the worst drought since 1956 and the adverse weather conditions showed no sign of abating, according to weather forecasts. The US is the largest corn exporter and major supplier of soybean and wheat in the world.

Meanwhile, China has seen a surge in the imports of grain and grain powder in the first half of the year to 1.9 million tons, up 283 percent from the same period of 2011, customs data released last week showed.

Imports of three major grains, corn, wheat and paddy rice, soared in the first five months of the year, with paddy rice imports reaching 1.98 million tons, up 618.8 percent year-on-year, data from the Ministry of Agriculture (MOA) showed.

The surging grain imports and rising international prices caused by the US' devastating drought raised concerns about a rebound in China's CPI, which grew 2.2 percent year-on-year in June, the slowest pace since January 2010.

"Imported price hike is unavoidable but the drought in the US can neither affect China's security of food supply nor dramatically push up domestic food prices because China's grain self-sufficiency is still very high and we had a good summer harvest," Ding Shengjun, a researcher with the Academy of State Administration of Grain, told the Global Times.

Chen Mengshan, a spokesman with the MOA, said last month that despite the surge in grain imports, the absolute import volume is not very big, as the imports of the three major grains only accounted for no more than 2 percent of the domestic output.

The output of summer grain in China reached 129.95 million tons this year, up 2.8 percent compared to last year's output, the National Bureau of Statistics said last week.

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