A food crisis for China? Not yet

BEIJING - China, with more than 1.34 billion mouths to feed, has always been on the world's watch-list for a food crisis due to the concerns that a crisis in China would require more grain imports and create shortages elsewhere in the world.

Will China's severe drought in its major wheat belt and the soaring agricultural commodity prices on the global market lead to a food crisis in China?

Chinese officials and experts put the answer as a "No".

The current drought would have limited impact on the country's grain production, Chen Xiwen, vice director of the Leading Group on Rural Work of the Communist Party of China (CPC) Central Committee, told a press conference in Beijing on Sunday.

The affected areas for winter wheat are less than one-third of the total acreage nationwide, and the output of winter wheat accounts for only 22 percent of China's total grain output, Chen said.

"The unfavorable factors of the dry spiral can be allayed or even eliminated through efforts," he said, adding that three rounds of precipitation and anti-drought measures have helped ease the drought.

Chen said he was also confident that China's grain prices would remain  "basically stable."

Chinese Premier Wen Jiabao assured the public last week during an online chat with netizens that the country has ample grain reserves after good harvests for seven straight years, which can be used to contain rapid price rises.

Zhang Ping, minister of the National Development and Reform Commission, China's top economic planner, also reaffirmed that the country has large grain stockpiles. "Our wheat reserve stands at 200 billion jin (100 million tonnes), roughly the country's one-year wheat harvest," he said.

In order to further relieve the drought and guarantee China's food security, the central budget has allocated 12.9 billion yuan ($2 billion) for fighting drought in the eight affected provinces.

The Food and Agriculture Organization under the United Nations issued a rare alert last month that the drought in north China could put at risk wheat production and also put pressure on wheat prices.

Further, wheat futures in Chicago have soared more than 60 percent in the past year and last month jumped to the highest level since 2008. Corn and soybean prices have also witnessed steep increases.

The price surge of wheat, however, is mainly a result of last summer's Russian drought, which will cause a 5.5-percent decrease in global wheat production in the 2010/2011 market year, said a JP Morgan report released on February 18.

"Chinese wheat demand is primarily associated with traditional buns and noodles, which generally require lower grades of wheat, as compared to Western wheat-based foods. Prices for wheat futures are generally associated with higher quality wheat, which are in shorter supply," it said.

China's wheat consumption is expected to edge up 1.7 percent, while imports might be 2 to 3 million tonnes this year, representing 1.9 percent to 2.8 percent of the country's wheat consumption, it said. China imported 1.4 million tonnes of wheat in 2010.

"Despite the likelihood of higher imports, China is likely to remain more than 95 percent self-sufficient in wheat in 2011," it said.

In addition to increasing irrigation in agriculture, the Chinese government should also invest more in technological progress to boost production, analysts say.