SHANGHAI (Interfax-China) -- It will be difficult for China to maintain a balance between domestic grain supplies and demand in the long term, the head of China's State Administration of Grain (SAG) said.
In 2007, China's grain output stood at 501.5 million tonnes, but there was only a modest surplus in wheat production. Rice and corn saw essentially balanced supply and demand, while the supply gap for soybeans expanded.
Although China's grain supply and demand will be basically balanced this year, thanks to the fourth consecutive bumper harvest year, production is under long-term pressure from declining arable land and a shortage in fresh water, SAG head Nie Zhenbang said, according to state-run People's Daily.
Nie admitted that expanding grain cultivation and increasing yields will be a difficult task.
The SAG warned that China will become increasingly reliant on edible vegetable oil imports due to growing demand and the limited ability to expand domestic supply capacity.
China's grain supply remains abundant for the moment, thanks to supply surpluses in the 13 major producing regions, Nie said.
Below is a table specifying China's 13 major grain supply regions.
Commentary
As we have previously stated, China's grain production may already be at, or very close to, maximum capacity. Nie's warning is a clear signal that Beijing is well aware of this trend.
This in itself is a major recognition of the difficulties China faces in maintaining a self-sufficiency ratio of 95%. While officials have previously emphasized grain security, we have long argued that this was simply not viable. Indeed our own projections would see that level of efficiency dropping to 85% or below by 2020.
We continue to stress our long term view that there will be serious implications for global grain markets, as China, with total population of 1.32 billion, becomes a significant net grain importer.
© Interfax-China 2008. For further information regarding Interfax China Commodities Daily Reports, contact David Harman at david.harman@interfax-news.com. Interfax also publishes a comprehensive China Grains & Soft Special Report in March 2008, contact David Harman for details.
