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Domestic grain prices to meet international levels next year

By Tu Lei (Chinadaily.com.cn)
Updated: 2008-11-14 17:22

China will increase domestic grain prices to international standards, said Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission (NDRC) yesterday in Beijing.

From next year when new grains hit the market, the minimum purchasing price for white wheat will be 0.87 yuan (12.7 cents) per 500 grams, 13 percent higher than 2008 prices, and prices for red and mixed wheat will be 0.83 yuan per 500 grams, up 15.3 percent, said Zhang.

The NDRC also plans to raise the minimum purchasing price for rice next year, but Zhang did not give further details.

Since 2005, international grain prices have soared, and hit the highest point this past summer, although important commercial commodities have now dropped due to global harvests and the financial crisis, said a recent report from the Economic Information Daily.

Figures show the cost and freight prices of red wheat, corn and soybean from the United States on November 5 were in line with domestic market. "But It is still an important project for China to come closer to overseas grain prices," said Zhang from NDRC.

Although international market grain prices have climbed high, grain production provinces in China are currently having a hard time.

For example Henan Province is an important grain producer. It produces 10 percent of Chinese grains using six percent of farmland. The harvest feeds nearly 100 million people, as well as providing 30 billion jin (1 jin equals 500 grams) of raw and processed grains per year to ensure domestic food safety.

However, figures show in 2007, the fiscal incomes for 70 counties, which produce 81 percent of the province's grain output, accounted for 19.1 percent of Henan's fiscal incomes.

And 52 domestic counties or cities that can produce 1 billion jin of grain each saw their fiscal expenditure per head was less than one-third the average domestic standard.

Domestic grain prices have lagged behind international prices, but the prices of agricultural productive materials are close to international prices, especially those for fertilizers.

Wan Xiaohu, vice-head of Hua county in Henan province, said the price of carbamide per bag has increased to 120 yuan from 90 yuan year-on-year, and prices for diesel and pesticides have soared.

"Production material prices have increased by 40 percent in the first half of this year, compared with the same period this year," said Wan.

By hiking grain purchasing prices, the NDRC hopes to motivate farmers to increase agricultural production, and the agency also pledged to further increase subsidies for agricultural production materials, such as machinery and crop seeds, Xinhua reported earlier.

Zhang also called the country's first medium- and long-term grain security plan, targeting production of at least 500 billion kilograms (1.1 trillion pounds) in 2010 and more than 540 billion kilograms in 2020. Output last year was 501.6 billion kilograms.