China to import cereals

Despite a perceptible recovery in agriculture production in China in response to recent policy changes, including introduction of direct subsidies, the country is likely to be a net importer of cereals in 2004-05 from a net exporter in 2003-04.

China's total cereal production in 2004-05 has been forecast at 350 million tonnes, up 8.2 per cent on last year. The cereal crop has been declining every year since 1998.

FAO said good weather and the governments' incentives and support policies were behind the rise in crop size.

"However, China is expected to change its net trade position in cereals from a net exporter in 2003-04 (July-June with net export of 9.6 million tonnes) to a net importer in 2004-05 (with net import of three million tonnes)," FAO said.

Agricultural production in China declined between 1988 and 2003 due to 15 per cent reduction in net sown area. In response, the Chinese government has launched a new initiative to reverse the trend.

The government has offered direct subsidies to farmers worth about $1.2 billion, or about $20 per hectare, along with phasing-out of agricultural tax over two years in the country's north-eastern region and five years in other areas, remunerative grain purchase prices and strict protection of farmland.

Recent reports released by the United Nations Food and Agriculture Organisation (FAO) indicate the measures have started to pay off.

Overall foodgrain production in China in the current year could rise increase despite damage caused by floods.

The combined size of the wheat winter crop harvested in May-June and spring crop gathered in July-August have been estimated by FAO at about 91 million tonnes, up 4.5 million tonnes, or five per cent, year on year.

The crop size was expected to rise despite an estimated one per cent decline in the are planted under wheat this year.

However, the crop would be about six per cent below the average crop size in the last five years.

As a result, China would have to import wheat in 2004-05. Last year, it imported one million tonnes but this year, it could rise to some six million tonnes.

Depleted wheat inventories would also push up wheat import volumes.

To boost production of maize, a major exportable cereal, China brought discarded lands under maize cultivation in 2004. Some areas traditionally used for minor cereal crops were planted with maize under a government order.

FAO said the maize crop could be 120 million tonnes, up four per cent on last year and over the average of the previous five years.

However, China was likely to export less maize in 2004-05 at about four million tonnes, against last year's 11.3 million tonnes. The was because of low stocks at the beginning of the year.

Paddy production in China in 2004 was likely to be 181 million tonnes, about 12.5 per cent higher than 2003, and just half a per cent above the average of the previous five years, said FAO. The rise was on account of larger cropping area and higher yield.

As a result, China's rice exports in 2004-05 could increase to 1.2 million tonnes from last year's 600,000 tonnes.