Economy

Senior executive confident of grain supply

(Xinhua)
Updated: 2011-02-18 07:56

File photo of Ning Gaoning

GUANGZHOU - Chinese leading grain, cooking oil and food enterprise COFCO on Thursday tried to ease public concerns over inflation, saying China is able to stabilize grain prices this year thanks to "substantial reserves."

The message by Ning Gaoning, chairman of COFCO, came after soaring food prices drove up China's consumer price index (CPI), the main gauge of inflation, by 4.9 percent year on year in January.

Ning spoke to Xinhua Thursday on the sidelines of the first APEC (Asia Pacific Economic Cooperation) Business Advisory Council (ABAC) 2011 meeting, which started Tuesday and ended Thursday in Guangzhou, the provincial capital of Guangdong in south China.

"Even if the total grain output drops a little in China this year, it won't cause any catastrophic results," said Ning.

Ning expected China to have ample supply of rice and wheat in 2011 but the stock of corn would probably drop by the year end, with the corn inventory-to-consumption ratio likely to fall to 15.4 percent from last year.

China's grain output rose 2.9 percent year on year in 2010 to 546.41 million tonnes, of which summer grain output was down 0.3 percent year on year to 123.1 million tonnes while the autumn grain output rose 4.8 percent to 391.99 million tonnes.

The rice inventory-to-consumption ratio, a major measure of food reserve, has stood between 30 percent to 40 percent in China since 2008, which is much better than around 18 percent globally, according to COFCO data.

Rice and wheat are the two major grain crops in China.

Globally, the Food Price Index rose for the seventh month in a row to reach 231 in January, topping the peak of 224.1 last seen in June 2008, the United Nations Food and Agriculture Organization said Thursday.

The COFCO chairman attributed the world food price hikes to soaring global demands, and extreme weather in major grain producing areas, such as the massive snowstorms in the United States, floods in Australia and droughts in China.

Excessive liquidity in the market, inflationary expectations and speculation also helped push prices of global agricultural products higher, Ning said.

Commodity and grain prices are still far from their historic peak in 2008 before the global financial crisis, he said, adding: "We're not yet in a global food crisis."

Further, Ning said he himself disagreed with the perception that price increases of agricultural products were the source of global inflation because the recent hikes of farm produces came much later than those of  petroleum, non-ferrous metals and other industrial products.

"Agricultural products only pick up their prices passively under the impact of global inflation," he said, calling for joint efforts by world governments to rein in the out-of-control currency issuance to tame global inflationary expectations.

Ning forecast China's inflation to remain high in the January-June period this year but to weaken in the second half.

To mop up excess liquidity and curb inflation, the Chinese central bank increased interest rates three times since October last year, and hiked the banks' reserve requirement ratio four times in the last two months.

China has set its inflation target at around 4 percent this year.

Due to a series of measures by the Chinese government to tightening liquidity and ensure market supply, inflationary expectations have weakened this month, Ning said.

He said COFCO will take advantage of its market position and continue to support the nation's food-related macro control policy and contribute to stable market supply.

"China still has great potential in expanding its grain production capacity, given its room in increasing low-yield farmland productivity and improving construction of rural infrastructure," he added.

The State Council, China's Cabinet, has unveiled price control guidelines to reassure consumers facing rising inflation and urged local authorities to offer temporary subsidies to needy families.

To encourage farmers to increase production, the State Council will increase minimum purchase prices for grain produced in 2011 by up to 21.9 percent from 2010 levels.

The central government has already embarked on 4 billion yuan (607 million U.S. dollars) for rural water conservation projects, and another 2 billion yuan will be allocated for farm irrigation systems and safe drinking water projects.