Drought Has Limited Impact on China's Grain Imports

Shi Xiaoguang, a 35-year-old major grain grower in Bozhou, Anhui, stands in the heavy rain he had waited two months for, yet he cannot bring himself to feel happy at all.

“The solar term has passed. No matter how much irrigation is done now, the trend of reduced corn and soybean yields is already set.” Shi Xiaoguang directs the planting workers to hoe weeds and spray pesticides, hoping to make up for the losses with all his might.

In Shidian Village, Dayang Town, Qiaocheng District, Bozhou City, Shi Xiaoguang, a widely known skilled farmer, has contracted more than 1,300 mu of land. However, this summer's drought has left his harvest in jeopardy. “Large stretches of corn have not tasseled, or the tassels are pitifully small. Of the 1,000 mu of cornfields, at least 30 percent is estimated to have no harvest at all.” he said.

Data from China's Ministry of Agriculture show that this summer, 12 provinces and regions including Hebei, Shanxi, Shandong, Henan, Anhui, Hubei and Shaanxi all experienced drought of varying degrees. Data released by the General Administration of Customs of China last Friday show that in the first seven months of this year, China imported a cumulative 11.34 million tons of grains and grain flour, an increase of 80.7 percent over the same period last year.

Whether the large-scale drought, especially severe drought in some major grain-producing areas, will intensify the pressure of surging Chinese grain imports has aroused great public concern.

The autumn grain accounts for 70 percent of China's annual grain output. It is understood that this round of drought coincided with the trumpet stage for most corn in the Huang-Huai, North China and Northwest regions and the booting stage for rice, when crops grow rapidly and have high water demand, and the drought has already hindered the growth process of crops in some areas.

Henan Province accounts for one-tenth of the national grain output. According to data provided by Henan's agricultural department, in mid-to-late July, the drought-affected area in Henan increased at a rate of 1.6 million mu per day, and a quarter of that drought-affected area was severely affected——even if these fields receive ample rainfall, they are basically in a state of total crop failure.

In Jilin Province, another important national commercial grain base, the rainfall in ten major grain-producing counties hit its lowest level since 1951, the drought was severe, and some plots even had total crop failure.

But Li Guoxiang, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences, believes that judging by many factors, this summer's drought has a limited impact on China's grain import situation going forward, and the market need not worry too much.

He pointed out that, first, China experiences drought of varying degrees every year, and nationwide, this year is not the most severe drought year; for the country's 1.6 billion mu of grain planting area, the share of severely drought-affected areas is not large. Moreover, the rice, the main autumn grain crop, is growing relatively well in non-disaster areas in the south. If handled properly, a bumper autumn grain harvest for the whole year is still within reach.

Statistics from the Ministry of Agriculture show that this year's autumn grain sown area increased by more than 6 million mu, and together with the increase in the area of high-yield crops, a rough estimate is that this alone can raise output by around several billion jin.

“Second, the main crop in some areas with severe drought is corn, and China has ample corn reserves. From what we can see now, even if the national corn output cannot increase this year, market demand can basically be guaranteed.” Li Guoxiang said.

The summer grain harvest, which has just been reaped, has laid a good foundation for China to ensure food security. Data released by China's National Bureau of Statistics show that in 2014 the national summer grain output totaled 136.6 million tons, an increase of 4.75 million tons, or 3.6 percent, over the previous year.

⟧ “International market prices are far lower than domestic market prices, which is a major reason for the sharp growth in China's grain imports, not that our grain gap has grown so large that we suddenly increased import volumes.” said Cheng Guoqiang, a researcher on grain trade issues at the Development Research Center of the State Council.

Since 2010, China's grain prices have been comprehensively higher than international market free-on-board prices, and to reduce costs, some Chinese enterprises have increased their grain imports.

A careful analysis of the growth in imported grains shows that large quantities of barley and sorghum, which are cheaper than domestic prices, are imported for feed processing. As Chinese living standards improve, in recent years the appropriate import from abroad of “strong-gluten and weak-gluten” wheat to meet demand for processing bread, cakes and high-quality foods has also risen markedly.

On one side, import volumes are expanding; on the other, domestic stocks cannot be digested. Agricultural experts point out that this is the new situation facing China's food security. To break this dilemma, it is urgent to adjust grain purchase and storage policies and straighten out the grain price mechanism.

“Specifically, this means forming a mechanism in which grain prices are determined by the market and promoting balance between the domestic and international markets. The state will no longer intervene in grain prices, but will gradually establish a target price system for agricultural products, subsidizing low-income consumers when grain market prices are too high, and subsidizing producers according to the price difference when grain market prices are below the target price, so as to effectively guarantee farmers' returns.” Cheng Guoqiang said.

He noted that China has already piloted new price and subsidy mechanisms for soybeans and cotton in some places. When conditions are ripe, the scope of reform will gradually be expanded.