Tag Archives: FAO

FAO Sees Another Record Rice Harvest In China

A farmer plants early rice in the field in Pingguo County of Baise City, south China's Guangxi Zhuang Autonomous Region, April 20, 2012. Farmers here were busy with planting on Friday, or Guyu (Grain Rain), one of the 24 solar terms created by ancient Chinese to carry out agricultural activities according to position of sun at the zodiacal circle. (Xinhua/Luo Zhiken)

Another bumper rice harvest is forecast for China this year, with the crop increasing 0.6% from last year’s record. The photograph above shows early rice being planted in Guangxi–and a reminder that it is still back-breaking work. Meanwhile, imports are expected to rise and exports to continue their decline of recent years as the country rebuilds its stockpile of reserves.

In its latest world rice outlook, the U.N.’s Food and Agriculture Organization (FAO) predicts the 2012 harvest will come in at 202 million tonnes of paddy (138.4 million tonnes of milled rice), up from 2011’s official forecast of 200.8 million tones of paddy (137.5 million tones of milled rice), which was a 3% increase on 2010’s harvest. The FAO’s optimism follows concerns that the persistent drought the southwest was threatening this year’s harvest.

China's Rice Production, Exports and Imports, 2007-2012The slowing rate of expansion of the harvest, the FAO says, “reflects rising costs of fuel and other inputs, which would dampen the positive effect of a 9%-18% increase in support prices.” As we have previously noted, China may be bumping up against the ceiling of its rice producing capacity. Beijing is directing more than four-fifths of its agricultural support budget of 1.2 trillion yuan ($190 billion) for this year to grain farmers (who include wheat and maize growers) to sustain the record levels of grain output and increase rural incomes.

Regardless of the bumper 2011 harvest, rice exports are expected to fall from 2011’s 516,000 tones to 400,000 tonnes this year (see chart). This reflects officials responding to domestic price inflation, particularly politically sensitive food price rises, by curbing sales abroad to restock domestic reserves. In addition, exports of China’s lower quality Indica rice are becoming less competitive, particularly in its African markets, where it is anyway looking to supply locally. For example, Chinese farmers will start growing rice on 25,000 hectares in northern Sierra Leone this year.

Imports are likely to rise. High domestic prices and supply shortfalls in drought-stricken southern provinces prompted large purchases by Chinese buyers, mostly from Pakistan and Vietnam, the FAO says. This has caused it to raise its 2012 import forecast from the 600,000 tones it had expected in January to 1 million tonnes. The FAO predicts that end-of-season stocks this year will rise to 83.1 million tonnes, up from last year’s 75.4 million tonnes.

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FAO Voices Concern At Drought In China’s Grain Belt

The drought on the North China Plain, the country’s main wheat growing region, that has lasted since October already alarms Chinese authorities, who say Shandong, the province at the epicenter and which has had only 12 mms of rain since October,  is facing its worst drought in 200 years. Now the U.N.’s Food and Agriculture Organization (FAO) has issued a special alert — which means an early warning alert — about the situation.

The agency says the June harvest of the winter wheat crop is at risk from the substantially below normal rainfall on the parched plain and from the diminished snow covering that has reduced the protection snow usually affords against plant-killing frost.

Although the current winter drought has, so far, not affected winter wheat productivity, the situation could become critical if a spring drought follows the winter one and/or the temperatures in February fall below normal.

In the maps below, the redder the area the more below average has been the cumulative rain and snow fall between October last year and January this. The worst affected area, circled in blue, falls directly over the plain.

North China Plain Rain- and Snow Fall, Oct 2010-Jan 2011

The main provinces affected are Shandong, Jiangsu, Henan, Hebei and Shanxi. In 2009, they produced 75.6 million tonnes of China’s 112.5 million tonnes of wheat, or 67%, a typical share. Offical estimates are that 5.2 million hectares of the 14 million hectares under winter wheat in these provinces may have been affected by the current drought. It has also left more than 2.5 million people and 2.8 million livestock facing shortages of drinking water.

China, we should note, is not facing a risk of imminent food shortages, even if the June wheat crop should fail; it has reserves and can import. However, wheat prices are already rising. The national average price of wheat flour is a sixth higher than a year ago. That and the worldwide rise in agricultural commodities prices are feeding through to persistent domestic consumer price inflation and the latest interest-rate rises, despite price controls introduced last year. Longer-term, authorities are concerned that China’s grain production, after seven successive years of increases, is hitting a plateau because of structural shortages of land, hands and water.

The North China Plain, 410,000 square kilometers of the most water-starved area in China, has become a poster child for the problem. A long record of deforestation and desertification has led to the erosion of former farmland. Urbanization, industrialization and the rapid growth of cities such as Beijing and Tianjin at the north-eastern end of the plain have gobbled up more farmland and caused the water table to sink lower and lower year after year. Shallow village wells are drying up. New wells are having to be sunk into the unreplenishable deep aquifer under the plain. Recurrent droughts only amplify the problems.

It is going to take more than normal rainfall to turn the increasingly arid North China Plain green again. The government is allocating vast sums not just to drought relief efforts but also to water conservation infrastructure and grand if controversial plans to draw irrigation water off three western and southern rivers through a series of canals and pipes — a project that will cost more than the Three Gorges dam.

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The Cassava Conundrum: China’s Food Price Spiral

High food prices are a symptom not source of China’s inflation. Excess liquidity still slopping about the system is the main underlying cause. But food prices are politically sensitive. Hence plans to control prices put in place last month. Beijing has to be seen to be in control, even though price controls rarely have a happy history.

High world food prices complicate the picture. China is a leading food grower, but as its population and their incomes grow, it is becoming an ever larger food importer. Its demand has helped drive up world food prices. The U.N.’s Food and Agriculture Organization’s Food Price Index is close to its 2008 peak, having risen unrelentingly since June (pulling fertilizer prices in its wake). China’s imports are not the sole cause; poor harvests and the falling U.S. dollar play their part. But there are echoes of the surge in prices of 2008, which caused food riots in several countries.

The world is better placed now than then. Rice, wheat and maize, three of the most important staples, are in more adequate supply than they were in 2008. Yet still prices are high. Governments, including China’s, will be running down stock piles so the next harvest is important, particularly of cereals, soybeans and sugar. The FAO worries that the increase in supply globally may not be sufficient to match the growing demand. In which case, high global food prices will continue into next year, making Beijing’s instruction to local governments to secure supplies at steady prices more difficult to carry out.

Next year’s cereal crop, particularly wheat and the coarse grains used in feedstock, may be the most critical. This year’s crop has been hit by drought and flood around the world. Although it is the third largest on record, it has come in less than expected. The wheat crop worldwide is 5% less than in 2009. Some growing countries have imposed export restrictions. Stocks have covered this year, but these will need to be replenished on top of the continuing growth in demand. The FAO says that, absent more bad weather, winter wheat plantings should raise wheat production next year to meet the increase in demand, but no more. It is a similar story with coarse grains.

China is the second largest grower of both wheat and maize so its weather and yields will be critical. That makes reports of a two-month drought in Henan, Anhui, Shandong and Hebei on the North China Plain and which produce over half the country’s summer grain, concerning. The drought-affected area accounts for a fifth of the country’s winter wheat planting area. Prices will remain high and volatile.

The global balance between supply and demand for rice is much better. However, the continuing weakness of the dollar and buyers switching from expensive cereals could force up rice prices over the coming months. Domestic prices will be insulated from this to some extent as rice prices, like those of wheat, are controlled.

Corn and soybean prices do track international prices fairly closely, and higher prices for these feed through to meat and egg prices. Oilseeds, sugar, dairy, meat and fish prices are also at or around 2-year highs on world markets.

Cassava may be the interesting story, especially in China where a moratorium on new grain ethanol plants and domestic price supports for maize has boosted the demand for cassava chips as feedstock for fuel production. Roughly half of China’s fuel ethanol and alcohol output are now derived from root crops, namely cassava and sweet potato, and domestic cassava production has doubled over the past five years while Chinese farmers have also invested in overseas production in countries from Cambodia to Liberia. Cassava is now trading at record levels on international commodity markets, and encapsulates the chicken and egg situation, so to speak, that China finds itself in with respect to food of being a big driver of world prices that it is also trying to control.

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China’s Record Harvests Offset Flood Damage To Farmland

[picapp align=”center” wrap=”false” link=”term=china%2c+wheat+harvest&iid=2544117″ src=”http://view3.picapp.com/pictures.photo/image/2544117/china-grain-reserves/china-grain-reserves.jpg?size=500&imageId=2544117″ width=”500″ height=”318″ /]

This Bystander has been trying to piece together the economic effects of this year’s rains, floods and landslides on the year’s harvests and so food prices. Though the official number for direct economic damage from this year’s extreme weather  is high, more than 350 billion yuan ($51.4 billion), it turns out the picture is surprisingly benign when it comes to food supplies. What nature takes away with one hand, she seemingly returns with the other

Damage to farmland has been localized though widespread and severe where it happened: 13 million hectares lost, according to the count of the U.N’s Food and Agriculture Organization, primarily across Guangdong, Guangxi, Fujian, Sichuan, Yunnan, Guizhou, Chongqing, Hubei, Hunan, Jiangxi, Anhui, Shaanxi and Gansu. The Ministry of Civil Affairs puts the number of hectares of flooded farmland  at 16.5 million, a higher number than the FAO’s but which may have a lower bar of damage.

Set against that a record winter wheat crop harvested in June (that harvest accounts for 95% of annual wheat production: the picture above is from Xian in Shaanxi at the end of May), despite the extreme weather. A similarly record cereal crop (maize for livestock feed and rice) is expected, too. Though the much smaller spring wheat planting now being gathered will have been reduced by the cold snap in the northeast at sowing, the 2010 wheat crop overall is expected to be 114 million tonnes, within a percentage point of last year’s record. The maize crop is being forecast at 166 million tonnes, which would be a high, and rice, more tentatively, at 196 tones, which would also be a record. Meat and poultry production has also been running at record levels, one reason the demand for maize has been so high.

All that, higher government subsidies for wheat and rice production, and decent stockpiles from last year are keeping food prices stable.

The human loss is easier to catalogue, if less palatable: 3,185 lives lost, according to the latest official estimate, with at least 1,060 still missing; 12 million have been displaced.


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