BEIJING, July 19 (Xinhua) -- Grain futures prices traded on the Dalian and Zhengzhou commodity exchanges are expected to maintain at high levels though China has achieved an increase in summer grain output for the eighth year running this year, analysts say.
Increasing demand, mounting planting cost and the government’s policies contribute to factors to prop up grain prices in the following period.
-- Bumper harvests don’t mean a fall in grain prices
This year’s summer grain output stands at 126.27 million metric tons (tonnes), up 3.12 million tonnes or 2.5 percent from a year ago. Bumper harvests reflect that the country has abundant grain resources to regulate the market, said Jing Zhuocheng, an analyst with Shanghai CIFCO Futures.
Fang Yan, vice director of the rural economy division of China’s National Development and Reform Commission (NDRC), said that the country is expecting a bumper harvest this year, with a successful summer harvest already completed and autumn grain production “going smoothly”.
Summer grain output rise has suppressed upward momentum of farm product prices to some extent. Agricultural commodity prices both at home and abroad slipped back in the second quarter but the majority of products still held at high levels compared with the past years.
Meanwhile, the government has steadily raised the minimum purchase prices for grain in an effort to protect farmers’ interest and stabilize production. It set this year’s floor prices for government’s wheat purchases at 1,900 yuan/tonne for white wheat and 1,860 yuan/tonne for red and mixed wheat, up 100 yuan/tonne and 140 yuan/tonne over last year. The minimum purchase prices of paddy have been set at 2,040 yuan/tonne, higher than 1,860 yuan/tonne in 2010.
Currently, strong glutinous wheat and corn futures are traded on the Dalian Commodity Exchange while early rice is listed on the Zhengzhou Commodity Exchange. The futures market plays an important function in discovering prices and grain futures prices usually hold the spotlight on the market.
-- Grain futures prices to stand at high levels
With rising demand, mounting planting cost and supportive policies, grain futures are expected to stay high, industry insiders predict.
As the national economy is going upward, grain demand from industries and feedstuff consumption will be boosted. Meanwhile, planting cost and labor cost are both on a rise, which will also support grain prices.
The government’s agriculturalpolicies in the past several years tended to protect farmers’ interest and also raised farmers’ reluctance to sell. Grain prices may maintain at a reasonable level and are unlikely to drop significantly.
Currently, the international grain prices remain high. Although the expected rise in global output may weigh on prices, grain futures are unlikely to dive as they will continue to be a strategic investment resource in the backdrop of weakening US dollar.
