China grain needs overstated
Analyst: Less grain needed for food security

BEIJING, July 8, 2005 (Dow Jones via Cropchoice.com): China may have overestimated its grain needs by assuming a food security requirement level of more than 400 kilograms per capita a year, an influential analyst with a government think tank said.

"The popular judgment held by many experts (in China) needs to be reviewed," said Han Jun, rural department chief with the Development and Research Center of the State Council, China's Cabinet.

Han told Dow Jones Newswires in a telephone interview Thursday that an estimate of 400 kg of grain per capita a year isn't essential to ensure China's food security.

"We have conducted a study, which is yet to be published. (According to its findings) 370 kilograms of grain per capita will roughly meet (China's) food consumption needs each year," he said.

Han said farmers had difficulty selling their grain whenever per capita grain supply surpassed that level.

He didn't provide a demand estimate for the nation as a whole.

Demand growth to be slow and gradual

According to Han, China's demand for grains will continue to grow in the years ahead but the pace of growth will slow significantly in the coming several decades, even though population will peak only in 2030, he said.

Urban consumption is expected to remain stable while that in rural areas will decline in the coming years, he said.

Continuing rural migration into cities in search of jobs and a switch in rural eating habits in favor of meat and other protein-rich foods as rural incomes rise, are factors expected to aid a drop in rural grain consumption.

The expected decline in rural demand will likely be more than enough to offset incremental demand from around 10 million people added to the population each year in the coming decades, he said.

Grain consumption in the form of feed will, however, continue to grow, as China's meat consumption remains at a comparatively low level, according to Han.

However, grain consumption for feed use tends to stabilize, or even decline, when per capita meat consumption surpasses 60 kg a year, a conventional saturation level in most markets.

Currently, Chinese urban residents on average consume around 40 kg of meat per capita a year, the figure is expected to rise to between 45 and 50 kg as incomes grow.

Growth in meat demand will come mainly from rural areas, where consumption now is around 19 kg per capita a year, Han said.

Govt measures to boost production paying off

While Han's views may force a rethink in government strategy on what it takes to ensure food security, the Chinese government is expected to go ahead with its programs to boost grains production.

Amid reports that the government's food grain stocks had fallen to 30% of annual demand at the end of 2003, a level not seen since 1974, the government took some unprecedented steps such as subsidizing grain growers, aiding seed and agricultural machinery purchases and scrapping a tax on production to encourage farmers to grow more grain.

Those measures, along with favorable weather, lead to a rise of 9% in Chinese grain production to 469.5 million metric tons in 2004.

Government officials have projected production to be flat to slightly higher in 2005.

However, despite a forecast supply gap of nearly 25 million tons in 2005 -- up from around 20 million tons in 2004 -- domestic grain prices have mostly remained unchanged or even fallen in some cases, partly because of frequent releases of government reserve stocks into the market.

To halt a decline in wheat prices this year, the government even had to order state warehouses to stop selling old wheat and instead buy new wheat from farmers in the summer season.

China's grain reserves, for which no reliable estimates are available from the government, are still considered to be far higher than the usual international standard of 17%-18% of annual consumption advocated by the Food and Agriculture Organization of the United Nations.


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