A bumper summer harvest would not help to ease the growth of the consumer price index (CPI) in China. Domestic grain prices are expected to decline slightly in the short term due to the bumper summer harvest supply, but it is likely to rebound shortly after, said Jiang Xingchun, an analyst of Guoyuan Securities.
China's grain industry can only satisfy its domestic demands, as the country's grain reserves have been stable without any noticeable increases in the past years, Jiang said.
Although an improvement in people's living conditions has caused changes in food
consumption patterns, the amount of grain used for feed has been gradually increasing, he said.
An increase in consumption of other agricultural products, such as pork, has intensified the demand of grain for feed, he added.
Grain prices are greatly linked to the price of many other agricultural products. For instance when pork prices go up again, it will drive the price of grain, Jiang said.
Meanwhile, prices of some products, such as edible oil and white sugar, which China largely depends on imports from overseas, will remain high, as the world's energy price continues to soar, Jiang added. "Inflationary pressures are still on China's policy makers as the government has set the target of 4.8 percent for this year's CPI," he said.
Summer crops, mainly cereals of rice and wheat, constitute 23 percent of the country's annual grain harvest. It is crucial to the next step of grain production as farmers' enthusiasm depends on their incomes during the summer harvest, said Li Ninghui, a researcher with the Chinese Academy of Agricultural Sciences.
In China, about 10 percent profit growth in grain planting will drive the country's total grain production up by 3 percent, according to Li Changping, an expert of rural issues at Hebei University.
The protective grain purchase price and grain subsidy have been the two effective measures for the Chinese government to encourage farmers to grow grain, said Zeng Liying, deputy chief of State Administration of Grain.
In the beginning of 2008, the State Council approved 95.063 billion yuan in subsidies for farmers. Those who grew wheat and oilseeds each received 1 billion yuan.
