Drought hit China expects bumper grain harvest

by Commodity Online

World’s largest grain consumer China said it expects a record grain harvest this year despite a drought that has hit its wheat-growing regions.

According to Chinese agriculture minister Han Changfu the country aimed to get the eighth successive record harvest.

It would come amid international concerns that the drought could hit China's harvest, causing it to import more, pushing global prices higher at a time when prices already are on the rise, he added.

Han said current wheat harvest benefited from recent rain and from massive drought-relief efforts. China's 2010 grain harvest totaled 546 million tons.

Han said the government will regulate grain prices but not keep it too low which would hurt farmers. China's main imports include corn and soybeans.

Concerns have been raised about the country's wheat supply this year due to a prolonged drought that affected production and a sharp drawdown of national and provincial reserves through a program of auctions designed to contain inflation.

A combination of increasing prices in the international market, high domestic inflation expectations, rising production costs and strong demand has pushed grain prices higher, but further increases will be restrained, Han said on the sidelines of the annual legislative meetings of the National People's Congress.

China consumed about 40 million tons of corn for production of starch and alcohol last year, accounting for about 25% of total output, industry analysts estimated.

China's grain output rose 2.9% to 546.4 million tons last year, marking the seventh consecutive year of growth.

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