Grain prices to stabilise as production tops targets

Soaring prices should level off and ease pressure on inflation, senior official says

Grain prices on the mainland should stabilise as output will top this year's target of 455 million tonnes, according to a senior central government official.

Zhu Zhixin , deputy minister of the National Development and Reform Commission, said yesterday the mainland's grain supply was sufficient and prices would not rise further.

His comments, aired on CCTV, were apparently aimed at easing worries that soaring grain prices could stoke inflation.

Official reports say retail prices of rice, flour and edible oil have risen by between 30 and 50 per cent in many provinces since late last year. That helped drive the inflation rate to 5.3 per cent in August, sparking speculation that the People's Bank of China might raise interest rates soon.

Grain prices jumped 31.8 per cent in the year to July. Mr Zhu said the central government had taken measures to boost grain production, including curbing the illegal use of farmland for industrial purposes and increasing agricultural subsidies.

'[Grain output] this year will definitely be higher than last year, with marked growth,' he said.

He said the mainland was likely to fulfil a production target of 910 billion jin (455 million tonnes), after a 4.5 per cent increase in the summer yield.

The authorities have put a halt to farmland acquisition this year and have shut down 4,813 development zones taking up 25,000 hectares of land - more than 70 per cent of which was for agriculture.

Mr Zhu said millions of farmers had benefited the most from soaring grain prices.

Farmers' incomes rose 12 per cent year on year from January to June, compared with average annual income growth of 4 to 5 per cent in the past few years.

However, CCTV said there would still be a grain deficit of between 50 billion and 70 billion jin given rapidly rising demand.

Mr Zhu said he was confident China would not rush to purchase grain on international markets given the steady production at home.

Rapid increases in grain prices and grain imports have driven fears at home and abroad about China's ability to feed its population.