China's grain output rose 2.8 percent from the previous year to 497.46 million tons in 2006, the National Bureau of Statistics (NBS) said on Wednesday.

It is the first time the country's annual grain output has increased three years in a row since 1985.

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Grain output rose nine percent year-on-year to 469.47 million tons in 2004 and grew 3.1 percent to 484.02 million tons in 2005.

But the supply of domestic grain still falls short of the country's demand, said analysts.

China faces the possibility of a 4.8 million ton grain shortage in 2010, almost nine percent of the country's grain consumption, according to the Study Times, a newspaper affiliated to the Party School of the Central Committee of the Communist Party of China.

To boost the development of grain production, the Chinese government said at the beginning of this year that it would continue with its policy to set minimum prices for grain purchase by the China Grain Reserves Corporation.

As an executor of China's macro-control policy in the grain sector, the company undertakes the majority of tasks involving grain purchasing, corn exports and imported grain reserves in order to keep the grain market stable.

China had 105.38 million hectares of land for grain crops last year, an increase of 1.1 million hectares over the previous year.

But the country's arable land had shrunk from 131 million hectares in 1996 to 123 million hectares in 2005.

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