The world faces the most severe inflation in food prices in history, as grain and soybean prices climb to all-time highs. Although some observers blamer the weather for the decrease in crop yields and that the growing demand for cereals used for bio-fuel production has conspired toward continuous price rises on world grain market; others regard it simply as a matter of demand outpacing supply. In seven of the last eight years, world grain production has fallen behind rates of consumption.
Soaring world grain prices are projected to keep driving food price inflation in 2008, as some Western analysts contend that China and India carve out a bigger place at the table; and a new dinner guest—biofuels—threatens to become the biggest glutton of all.
During the next five years, food inflation is forecasted to increase by an average of 7.5 percent, well above the 2.3 percent average in the last ten years. The prices of commodities such as corn, wheat, soybean oil and milk have been fixed on moving towards a new plateau, analysts have said.
Despite the growing acceptance of gene-altered crops, grain production will bump up against the availability of arable land and stressed water resources for irrigation.
Confronting seemingly insurmountable problems in grain production, food price-inflation fears now jolting many countries are easy to understand, as food security is national security.
Nevertheless, some industrialized countries are now pointing fingers at China's grain imports for price hikes in global grain markets. The groundless accusation runs contrary to China's de facto grain demand and supply.
In fact, China's grain yields have steadily grown from 2004 to 2007, and grain reserves have increased accordingly, contributing to a balance between demand and supply. Compared with the inflation in global grain market prices, the rise in China's grain prices is still reasonable and structured.
According to the Ministry of Agriculture, in the first 11 months of 2007, China exported 9.2 million tons of cereals – up 77.6 percent – and imported 1.44 million tons, down 56.6 percent.
Total cereal exports included: 1.16 million tons of rice paddy, up 7.3 percent; 4.87 million tons of corn, up 85.1 percent; and 2.68 million tons of wheat, up 114 percent.
Total imports included 416,000 tons of rice paddy, down 34.2 percent; 23,400 tons of corn; and 99,000 tons of wheat, down 83.6 percent.
Net paddy exports were 746,000 tons, up 65.2 percent; while net corn exports were 4.85 million tons, up 88.8 percent. The net wheat exports were 2.58 million tons, up 470 percent.
Meanwhile, grain reserves remain far beyond the food security yardstick, 17-18 percent, set by the FAO (UN Food and Agriculture Organization). China; therefore, is not threatened by food insecurity.
The Ministry of Finance decided to scrap export rebates for 84 agricultural products on December 20, 2007 – 13 percent of which had been for grain. The Ministry wanted to discourage exports and ensure the domestic supply of farm produce in the nation where food prices drove inflation to an 11-year high of 6.9 percent in November 2007. This move would regulate grain imports and exports.
At present, China is not only more than self-sufficient in grain; but motivates stabilization in global grain markets.
In the mid-and long-term; however, China will have to keep vigilant against grain and food insecurity considering its dense population and limited arable lands.
By People's Daily Online
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