With abundant reserves, China can ward any grain shortages in the near- and medium-term despite consecutive drops in grain output over the past few years.

But agricultural experts and government officials have warned about a tight supply in the grain market as they predict that the country's reserves may be depleted by 2006.

The mixed forecast came after the National Bureau of Statistics recently predicted a 2.4 per cent fall in this year's summer grain output - the yield is estimated to plummet by 2.4 million tons to 96.22 million tons.

The plunge is mainly attributed to a sharp decrease in summer grain growing acreage, which was cut by 1.79 million hectares to 25.62 hectares.

This would be the fourth year for China to post a decline in total grain yield since 1999.

Han Jun, director of the Research Department of Rural Economy at the State Development Research Centre, said the country had recorded a cumulative decrease of 59 million tons of grain between 1999 and 2001.

Since 2000, demand for grain consumption has been between 480 million and 490 million tons each year while output has been around 455 million tons, generating an annual shortfall of about 25-35 million tons.

But the shortfall has been made up for by the huge State grain inventory, which is estimated to reach about 250 million tons, Han said.

China benefited from successive bumper harvests and an oversupplied market between 1995 and 1999, with an annual output of about 500 million tons.

"Based on the statistics, our basic judgment is that China's grain supply-demand relationship is gradually edging towards a basic balance and a general grain shortage will not appear in the near and middle term," Han said.

The researcher stressed that China's grain production capability has been greatly strengthened through adopting more advanced farming technologies and tools despite continuous drops in growing acreage.

What's more, demand is not expected to see a big rise in the future as both urban and rural consumption has been decreasing due to growing consumption of meat and other non-staple foods, he added.

An official with the State Grain Reserve Administration was quoted by the Beijing-based Economic Daily as saying that the existing supply would last a few more years.

However, the official forecast that a turning point in the supply-demand relationship may appear in the second half of 2005 or the first half of 2006 if the country's grain output continues to fall.

(HK Edition 07/31/2003 page7)