SINGAPORE/BEIJING (Reuters) - A prolonged drought in China
could hit grains output in key growing regions, further squeezing global
supplies and putting upward pressure on prices, but plentiful domestic wheat
stocks will act as a cushion and keep import volumes low.
Analysts are
closely watching the weather in
"Parts
of
"They
are going to be looking to North America and
Chicago Board
of Trade corn has climbed 80 percent since the start of May last year, while
wheat has risen around 50 percent. Last week alone corn and wheat jumped more
than 10 percent on expectations of a global squeeze in supplies.
CROP CONCERNS
& TIGHT GLOBAL SUPPLIES
Timely corn
seeding is crucial for optimal yields needed to replenish
About 80
percent of the
Rains in the
northern U.S. Plains have put spring wheat plantings behind schedule, with
seeding only 34 percent complete in the top wheat state of
CORN
FORECAST, INFLATION
A Chinese
government think tank has forecast 2011 corn output will rise to a record
181.50 million tonnes due to increasing acreage, but
analysts said it would be a tough target to achieve.
"The
180 million tonnes level is a bottleneck, and the
general market forecast, which is yet to come, should be lower than the
forecast," said an analyst with consultancy China Corn.
Food prices
fell 0.4 percent in April from March but were 11.5 percent higher than a year
earlier.
"Global corn supplies are extremely
tight and the world is banking on sharp increases in production," said
Mathews. "Chinese authorities were suggesting a lift in local production
and they will need every bit of that."
Barclays
Capital warned that recent extreme weather incidents have created upside risks
to food inflation for the second half of 2011, citing
"Drought-like
conditions in the
"
However, Hai Yang, a wheat analyst with Esunny
Information & Technology Co., said
Water levels
on the Yangtze midstream are 6 meters lower than they were the same time last
year, with rainfall only a fifth of the levels seen in 2010, according to the
China Daily newspaper, quoting local drought relief agencies.
STOCKS,
IRRIGATION
The market is
not overly concerned about wheat supplies in
"The
weather this year is likely to be abnormal, with northern China likely
experiencing floods while southern China likely sees drought," said Gao Yanrong, an analyst with Dalu Futures.
Officials in
"We
have wells, and we can irrigate (the corn) even if there is a drought,"
said a farm ministry official in
The country
is also seeking other origins and developing new sources for supply.
Analysts say
the weather in July-August, which is the crucial growing period, will be the
deciding factor to final output.