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China Can Keep Grain Prices Stable in 2008

China can keep grain prices stable amid supply shortages and rising agricultural costs, a senior grain official said in Beijing on Monday.

There is rising price pressure for major grains in China this year as a result of deficient supplies, soaring agricultural product costs and fluctuations on international futures markets, Zeng Liying, deputy director of the State Administration of Grains (SAG), told an industry meeting.

However, she added, China can ensure price stability thanks to abundant grain reserves.

The demand-supply gap has narrowed from 50 billion kilograms in 2003 to 15 billion kg at present, boosted by four straight years of bumper harvests in major grain production bases, she said.

The SAG has auctioned more than 50 billion kg of grain over the past two years, and it purchased 28.9 billion kg of wheat in 2007 to secure market supply, all based on minimum purchase prices, Zeng said.

The SAG predicted China's grain output would be about 500 billion kg in 2008, which would likely be the fifth consecutive year of large wheat harvest, Zeng said.

The extreme weather this past winter and severe drought that has hit northern China this spring, during the ploughing season, will make it harder to ensure grain supplies this year, Chen Xiwen, the director of the office of the central leading group on rural work, has said.

The country raised its minimum purchase prices for rice and wheat for a second time this year to spur grain production and curb inflation, which hit a 11-year high of 8.7 percent in February.

The China Banking Regulatory Commission has also urged that credit support to grain producers be guaranteed.

Premier Wen Jiabao has said that China, with 40 to 50 million tons of rice stocks, would not be greatly affected by global price hikes.

But as connections between the domestic and world grain markets increased, it had become more difficult to maintain stable domestic prices, said SAG Director Nie Zhenbang.

Wheat and rice stocks had increased in recent years, but uneven stock distribution in producing areas and selling regions should be balanced, said Nie.

China harvested 501.5 million tons of grain in 2007, 15 million tons less than the total demand, official figures show.

"We should always keep alert in guaranteeing grain security," said Nie.

(Xinhua News Agency April 15, 2008)

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