Thu, Feb 10, 2011 - Page 11 News List

China boosts rice purchase prices

Bloomberg

China, the world’s largest rice consumer, increased the minimum purchasing prices for this year’s crop by as much as 22 percent to boost stockpiles and increase production as it struggles to contain rising inflation.

The government will raise the price for medium-grain rice by 23 yuan (US$3.50) to 128 yuan for every 50kg, the Chinese State Council said in a statement on its Web site without elaborating.

Rice is a staple food of China’s 1.3 billion people and the country is largely self sufficient in the grain.

Rice prices climbed to a record yesterday in China and the highest in 27 months in Chicago last week on concern supplies may lag -behind demand. China’s winter wheat crop may be reduced by drought in the north as the government works to stabilize food prices and contain inflation, forecast to rise at the fastest pace in 30 months last month.

“It may initially raise people’s food inflation expectations, but if the incentive is big enough and results in a meaningful increase in grain production, it will ultimately help rein in rising food prices when those grains reach the market,” Industrial Bank Co (興業銀行) economist Lu Zhengwei (魯政委) said.

The state reserve usually pledges to buy from local farmers at the government-set “minimum purchasing price” if rates in major producing areas fall below that level near harvest time.

The country, the largest wheat producer, is also contending with severe dryness in the North China Plain after “substantially” below-normal rain since October last year, the UN’s Food and Agriculture Organization said. The drought in Shandong Province may persist, threatening winter-wheat crops, said the Qilu Evening News, citing the weather service.

Still, “so far the drought hasn’t affected rice,” Tian Feng, analyst at BOC International Futures (China) Co. “The earliest rice crop is to be planted in March.”

Early indica rice futures on the Zhengzhou Commodity Exchange gained as much as 3.4 percent to set the highest price ever.

Futures gained 0.2 percent to US$15.950 per 45.4kg on the Chicago Board of Trade at 6:24pm in Shanghai. Contracts rose to US$16.30 last Thursday, the highest since November 2008 on speculation that US farmers will plant fewer acres after price gains trailed other agricultural commodities.

The price the Chinese government pays for medium-to-late indica rice will increase by 10 yuan to 107 yuan per 50kg and the price for early indica rice will gain by 9 yuan to 102 yuan, the State Council statement said yesterday.

“The magnitude with which the government raised the 2011 crop purchasing prices showed that it wants to boost government stockpiles in order to combat inflation in the future,” Wanda Futures Co director of research Wang Chen said by telephone from Beijing yesterday.

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