Official: Drought will not heavily affect domestic grain and oil markets

The current drought in southwestern China will not considerably affect prices in grain and edible oil markets across the country, said an unnamed official from the Pricing Department under the National Development and Reform Commission (NDRC) on April 13.

The NDRC estimates that the drought in southwestern China will severely affect wheat growth in the region but will only affect late-season indica rice and round-grained non-glutinous rice slightly because they have not been planted.

Although the drought is expected to affect wheat growth and output in five provinces and autonomous regions in southwestern China, they only account for about 5 percent of China's total output. The wheat output in the hardest-hit province of Yunnan accounts for less than 1 percent of the total. Overall, the drought will only have a slight impact on China's wheat output.

The official said that although the drought has affected the planting of early-season indica rice in part of the region, China still has sufficient wheat and early-season indica rice stocks. As 60 percent of edible oils in domestic markets are imported and domestic edible oil prices are mainly subject to the international market, the drought will only have a slight impact on domestic edible oil prices.

The grain price in the international market has fluctuated greatly over the recent period because of U.S. dollar exchange rate movements, speculations and other factors in the financial market. The official's analysis shows that owing to good grain harvests in China for six consecutive years, the grain-stock-to-consumption ratio for state-owned grain enterprises stands above 40 percent, far higher than 17 to 18 percent, which is internationally-accepted alarm level.

Therefore, the supply in the domestic grain market will be fully guaranteed and domestic grain prices will not fluctuate along the international market.

Pork prices have been on the decline since the Winter Solstice of last year. At present, the pork-grain price ratio is lower than the break-even point of 6-to-1. The official said that the central government has now activated a regulation and control mechanism in response to the excessive decline of pork prices. On one hand, it has sent out early warnings to pig farmers via media institutions, but on the other hand, it has also begun to purchase pork to replenish the central frozen pork reserves.

As for the decline in edible oil prices, the official said that the prices will fluctuate slightly but will not rise sharply in the near future because the international edible oil market is now witnessing an oversupply while China's edible oil companies have adequate raw materials and a high inventory.

By People's Daily Online