Wheat in China
October 19, 2010 2 Comments
We can see from the graphic that China had an increasing wheat trade deficit, until 1996, when the imports was almost equal to the exports. But then it worsened again in 2004.
Bryan Lohmar summarized several reasons for the low production of wheat in China, in his report China’s Wheat Economy: Current Trends and Prospectsfor Imports:
- Decreasing sown area in China
- Low wheat prices: farmers moved productive land from wheat to high-value horticultural crops.
- Policy changes, market development, and increasing commercialization in rural areas: many provinces abandoned the grain quota delivery obligation; instead, they accepted taxes and fees in cash.
- Depleted resources, particularly water: both ground and surface water sources are showing signs of severe overexploitation
And he concluded:
China’s wheat production will likely remain at or below 90mmt for the foreseeable future. China will continue to expand horticultural production, especially for export markets. China’s wheat marketing institutions are becoming more market oriented and are moving beyond government intervention, and farmers are increasingly making decisions based on commercial considerations.
Is this the case for Chinese wheat production? Chinese wheat industry is going to be market-oriented and the government intervention is going to fail?
Well, it may be not. China is self-sufficient in wheat production last season, even when a series of flood and drought in several provinces have badly damaged the wheat and other grains’ productions in China, the wheat price is constantly going up, but it is basically self-sufficient. Chinese government considers food self-sufficiency as “a matter of national security”, and has been trying to subsidize the wheat production and sale in many ways.
What Leslie Hook wrote in this article at Financial Time precisely describes the whole picture:
China’s self-sufficiency policies are often costly for consumers as they drive up the cost of grain. But today, as world wheat markets shudder after an export ban from Russia and similar talk from Ukraine, China’s leaders are no doubt breathing sigh of relief.