China, the largest wheat consumer, may have a prolonged drought in its main growing region, according to Minister of Agriculture Han Changfu. Futures in Zhengzhou climbed to a record.
About 115.95 million mu (7.73 million hectares) of wheat, or 42 percent of the total planted in the eight major producing provinces, has been hit by the dry spell that may last into spring, Han said in a statement yesterday.
Rain on the North China Plain has been “substantially” below-normal since October, the United Nations’ Food and Agriculture Organization said Feb. 8. Drought could force China, largely self-sufficient in wheat, to buy more from overseas, said Jason Britt, an analyst at Central States Commodities Inc.
“That sends a little bit of a shiver through the market,” Britt said by telephone from Kansas City, Missouri. China may import 1 million metric tons of wheat this year, compared with 9.8 million tons by Egypt, the top buyer, according to the U.S. Department of Agriculture.
Snow fell in drought-hit provinces including Hebei, Shanxi, Henan, Shandong, Jiangsu and Anhui since yesterday which will help relieve dryness, the National Meteorological Center said on its website. Rain and snow are forecast today, it said.
Henan, the top grower, had on average 5.5 millimeters of snow and some areas got as much as 23 millimeters, the weather agency in the province said. Neighboring Shandong received as much as 3.5 millimeters, and more is forecast on Feb. 13, the local bureau said.
Wheat futures in China surged to as much as 3,064 yuan ($465) a metric ton today, a record for the most-active contract, before falling to 3,036 yuan. The price in Chicago, a global benchmark, fell 0.6 percent to $8.8075 a bushel after jumping to $8.9325 a bushel yesterday, the highest level since August 2008.
Most crops in the wheat region are irrigated and only about 5 percent of annual precipitation normally occurs from December to February, said Mike Tannura, a meteorologist at T-Storm Weather in Chicago.
“Even though it’s been dry relative to average, 95 percent of precipitation occurs from March through November,” Tannura said. “It’s a concern, no question about it, but one big rain in March and all of a sudden they’re back above average.”
China pledged to spend an extra 6.7 billion yuan ($1 billion) to boost emergency water supply and irrigation resources, according to a government statement. This is in addition to 10 yuan per mu in direct subsidies to encourage farmers to water wheat, and another 10 yuan to fertilize weakened seedlings, it said.
Rising food costs have stoked inflation in emerging economies. The past month’s protests in North Africa and the Middle East were partly linked to food costs.
China’s consumer prices advanced 3.3 percent last year, breaching a government target of 3 percent. The January rate may have accelerated to 5.4 percent, according to the median estimate of 26 economists surveyed by Bloomberg, from 4.6 percent in December. Inflation in Indonesia, Southeast Asia’s biggest economy, hit a 21-month high of 7.02 percent.
The provinces hardest hit are Shandong, Jiangsu, Henan, Hebei and Shanxi, representing 67 percent of the country’s wheat production in 2009, the FAO said. China has 14 million hectares (34.6 million acres) planted with winter wheat in those areas, of which about 5.16 million hectares may have been hurt, it said, citing government estimates.
China is the largest wheat consumer, representing about 17 percent of global use in the year to June 30, the London-based International Grains Council predicts. The country’s wheat output may have dropped to 114.5 million tons at the last harvest from 115.1 million tons a year earlier, the USDA estimates. Macquarie Group Ltd. expects production to drop a further 4 million tons this year.