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China's grain reforms may lead to rising imports

SHANGHAI: China's agricultural policy outlined by Premier Zhu Rongji is expected to increase farm imports as China moves to integrate with the world economy, industry analysts said on Monday.

Opening the National People's Congress, China's parliament, on Sunday, Zhu stressed the need for structural reforms of the farm sector, with emphasis on quality and efficiency, as well as environmental protection aimed at sustainable development.

While affirming the government's commitment to buy surplus grain from farmers at protective prices, Zhu reiterated that from this year the grains under state protection would be scaled back.

"The theme is pushing for 'higher prices for better quality'," a foreign industry source said. "When you want quality, you make a trade-off for quantity."

The likely result would be a growing dependence on imported grains, he said.

In 1999, China turned into a net importer of grains with imports of 7.72 million tonnes and exports 7.58 million tonnes.

Soyabeans accounted for 56 percent of the imports, while wheat, once China's main grain purchase, dropped to just six percent, state media have reported.

CROPS DROPPED FROM PROTECTION

China's agricultural authorities made a major policy shift last year, cutting back on protection after four years of bumper crops overstretched the state grain system's ability to manage the surplus.

The Asian economic crisis, which hurt China's agricultural exports, also put pressure on the government to speed up the reform, analysts have said.

"The early rice and spring wheat should have been dropped from protection years ago," a Chinese grain source said.

These bland-tasting grains, which consumers had spurned for some time, were grown mainly because farmers could count on the government support, he said.

It was still unclear which crops farmers would plant this spring, but the likely substitutes included sorghum, legumes and soyabeans, he said.

The removal of support for wheat grown south of the Yangtze was a crucial factor in encouraging a switch to rapeseed, which is planted in late fall and harvested in spring like wheat.

Rapeseed acreage in the late autumn of 1999 was up 12.2 percent, according to a survey by the State Statistical Bureau.

WHEAT IMPORTS SET TO RISE

Underlying the change in farm policy was a recognition that China should use its limited land and water resources to plant staple grains of higher value and more cash crops, the foreign industry source said.

"It has become evident that farmers could not raise their income by planting the usual staple grains no matter how the government tried to protect the sector," he said.

The prospect of China opening its tightly controlled farm market to cheap imports after joining the World Trade Organisation gave further impetus to the change, he said.

In 1999, China's wholesale wheat prices dropped 20 to 30 percent, and since 1996, prices have dropped more than 40 percent, according to a U.S. agricultural attache report.

China's winter wheat planting was down more than six percent for the 1999/00 winter crop and analysts forecast the shortfall will be met by increased imports.

China's wheat imports hit a record low of 448,000 tonnes in 1999, down 70 percent from the year before as provincial grain bureaux sold large amount of old crop reserves.

Analysts said they expected the import trends to reverse this year, with estimated purchases ranging from a low of 1.5 million tonnes to a high of three million tonnes. -Reuters