HONG KONG - China has rung the alarm
bell over potential threats to its grain security,
scrapping export rebates and imposing tariffs and
quotas on sales of its farm products overseas,
after the fourth successive year that increased
harvests have failed to meet demand.
The
country's output of grain, including rice, wheat,
corn and soybean, rose 3.5 million tons, or 0.7%,
last year to more than 500 million tons,
continuing a trend of improved harvests that has
run since 2004, according to Ministry of
Agriculture figures.
Still, a Politburo
meeting presided over by President Hu Jintao in
December rang the alarm bell about threats to the
country’s grain security, saying the agricultural
and rural sectors face new
challenges and problems, said
a report by Xinhua News Agency without
elaboration. Much work was required to improve
productivity and guarantee the supply of farm
produce, the meeting agreed, according to the
report.
The 2007 grain output of 501.5
million tons, though an improvement on the year
before, still fell short of demand, the Shanghai
Daily reported a few days after the meeting,
citing Minister of Agriculture Sun Zhengcai. Grain
supply per capita dropped to 378 kilograms last
year from 412 kg in 1996, Sun was reported as
saying.
The country consumed 517 million
tons of grain last year, amid an output shortage
of corn and soybeans, the State Grain
Administration figures show.
The grain
harvest is still short of the 512 million tons
milestone reached in 1998 as a food surplus and
stored output making farmers reluctant to grow
more. The result was a rapid decrease in the
planted area and a downward trend in grain output
to about 430 million tons in 2003. Output then
picked up by 38.8 million tons to 469.5 million
tons in 2004 as the government offered direct
subsidies for grain production and cut and made
exemptions to agricultural tax.
The alarm
about possible grain shortages comes as the
government is increasingly concerned about the
country's soaring inflation rate. The consumer
price index (CPI), the main gauge of inflation,
jumped 4.8% last year, more than triple the 1.5%
rate in 2006, touching an 11-year high of 6.9% in
November before slowing to 6.5% in December.
Behind the November increase was an 18.2%
jump in food prices, led by a 56% surge in the
cost of pork and a 38.8% jump in overall meat and
poultry prices. The grain price was up 6.6% year
on year, the National Bureau of Statistics (NBS)
said.
Higher global grain prices, fed by a
severe drought in major wheat producer Australia,
are helping to drive up prices in China,
economists say. Wheat prices increased 127% in the
past year, according to the futures price at the
Chicago Board of Trade. The industrial use of
processed corn, a poultry feed, is also having an
impact, the economists say.
China, which
has to feed a fifth of the world’s population with
less than one-tenth of global farmland, according
to Shanghai Daily, nevertheless has been
increasing its exports of agricultural products.
The country's exports of corn jumped 85.3% to 4.87
million tons in the first 11 months of 2007
compared with the year-earlier period, while its
overseas sales of soybeans rose 23.8% to 400,000
tons from the previous year. Exports of rice rose
5.8% to 1.13 million tons and wheat exports surged
206.51% to 1.85 million tons.
In a move to
encourage producers to sell at home and ensure
domestic supplies of farm produce, the government
in December scrapped a 13% export tax rebate on 84
categories of grain and grain products. China also
imposed export tariffs ranging from 5% to 25% on
57 categories of major grains and powder products
from January 1. Export quotas were also set on
rice, corn and wheat powders to regulate overseas
sales of milled grain flour.
"These
measures show the government’s determination to
ensure domestic supply and stabilize grain prices
through taxation," An Tifu, an economist with the
Beijing-based Renmin University of China, said.
Even so, these policies alone are unlikely
to check increases in grain prices because of
global factors such as surging energy prices, he
said, calling for more incentives for farmers to
increase their production.
As the
country's recent severe snowstorms - the worst in
the country for more than 50 years according to
some reports - natural disasters are a constant
threat to China's agriculture output, on top of
other challenges such as shrinking cropland and a
drift of increasing numbers of farmers to towns
and cities frequently in the search for better
paying jobs.
Natural disasters in the
first nine months of 2007 resulted in a loss of
44.5 million tons of grain, according to the
Ministry of Agriculture. Since then, a month of
snow and ice storms beginning January 10, killed
69 million head of livestock and destroyed nearly
62 million acres of farmland, state media
reported.
Jiang Yong, a researcher with
China Institute of Contemporary International
Relations, said planting acreage has dwindled. The
amount of arable land declined 4.6 million mu
(about 700,000 acres) last year to 1.827 billion
mu, according to Ministry of Land and Resources
data.
Jiang also attributed part of the
increasing threat to grain security to the
government’s failure to impose import quotas on
soya. He said international companies control more
than 40% of China’s soya processing industry and
90% of the country's soya imports, citing
agribusiness giants such as Illinois-based Archer
Daniels Midland Company (ADM), one of the world's
largest agricultural processors of soybeans, corn,
wheat and cocoa, New York-headquartered Bunge Ltd,
Minnesota-based Cargill and French agriculture and
energy giant Louis Dreyfus.
Jiang said the
increasing food prices and worsening inflation
would make the lives of poor people much more
difficult. "The impact of higher consumer prices
must be bigger upon the poor than the high-income
or rich people in China," he said.
The
average annual income of a farmer is expected to
increase 7% this year to 4,000 yuan (US$558),
helped by higher food prices, increasing numbers
of rural migrant workers and more government
subsidies, according to Xinhua News Agency. That
still falls short of the more than 10,000 yuan per
person for urban residents.
Proposals that
China solve the insufficient domestic grain supply
by using its increasing foreign exchange reserves,
which rose 43.3% last year to US$1.53 trillion, to
buy on the international market were not the
answer, Jiang said. This would make the country
increasingly reliant on imports and put upward
pressure on grain prices and lower price
expectations in the domestic market.
"If
increasing imports could solve the insufficient
domestic supply of grain, the stampede caused by
Carrefour's sale of discounted oil would not have
happened," he said, referring to a tragedy last
November in which three people died and 31 others
were injured, after an outlet of hypermarket chain
Carrefour in Chongqing offered cut prices on
cooking oil by 11.5 yuan from the usual price of
51.4 yuan.
Olivia Chung is a
senior Asia Times Online reporter based in Hong
Kong.
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