Feb. 17 (Bloomberg) -- Wheat crops in China’s drought-affected Shandong province, the country’s second-largest grower, may escape widespread damage if irrigation and rains replenish moisture in parched soil, said a local water official.
“If the plants get watered after awaking from hibernation and start greening, production won’t face any problems,” said Yin Changwen, director of Shandong’s drought-relief office. Shandong has “relatively” sufficient water reserves after it reinforced some of its older reservoirs, Yin said.
Wheat in Chicago climbed to the highest level since 2008 this week and to a record in China on concern the worst drought in 60 years will cut output in the world’s biggest producer and increase its imports as global supplies tighten. The dry spell hasn’t had a significant impact on crops as most were irrigated before the winter, government meteorologists said.
“The question is whether effective irrigation can be delivered in time to offset damage,” Li Qiang, managing director at Shanghai JC Intelligence Co., said by phone from Shanghai. “The production costs of wheat will certainly go up, but that doesn’t mean China needs to import.”
In Shandong, about 34 million mu (2.3 million hectares) of wheat out of a total 53 million mu have been affected by a “largely light drought,” said the drought office’s Yin in an interview Feb. 14 in Jinan. “About 90 percent of the total 53 million mu wheat can be assured” of access to water, he said.
About 30 million mu of wheat in Shandong were watered before the winter, Yin said. The remaining 20 million mu didn’t get irrigated because it hadn’t been necessary in the past or the facilities to do so weren’t in place, he said.
Without rain and irrigation, output is likely to fall, according to five farmers interviewed by Bloomberg News in Jining, a region about 200 kilometers south of the provincial capital Jinan. Jining grew about 10 percent of the 20 million tons of Shandong output last year, official statistics show.
“Don’t let the government fool you: this drought is destroying us farmers,” said 70-year old Li Zhongchun, who farms half an acre of wheat near Qufu, the ancestral home of Confucius. In addition to the lack of rain, the area has had a freezing winter, killing some of the weaker seedlings that normally would have been protected by snow, Li said, who participated in the survey.
May-delivery wheat gained as much as 1.1 percent to $8.79 a bushel on the Chicago Board of Trade, and was at $8.755 at 5:21 p.m. Singapore time. The most active contract gained to $9.1675 on Feb. 14, the highest price since August 2008. Futures have jumped 72 percent over the past year.
“Yes, the plants can recover, but it’s a big condition to meet,” said Li Qiang of Shanghai JC, referring to the assumption that the crops will get irrigation or rain in the spring. “Clearly some of the losses are irreversible and getting adequate irrigation is a costly investment” that some farmers may not make, Li said.
“Planting wheat is too big an investment,” said 36-year-old Hu Bo, a farmer near Liu Zhuang village. To water 1 mu needs about 5 kilograms of diesel, costing about 50 yuan ($8), and about a further 100 yuan for fertilizers, said Hu, standing next to a 12-horsepower tractor used to deliver water from a nearby well. Per capita net income in rural areas was 5,919 yuan last year, according to the statistics bureau.
Hu farms about 4 mu of wheat near Jining, where Premier Wen Jiabao visited during the Lunar New Year to inspect drought-relief efforts. The government is giving 20 yuan per mu in irrigation and fertilizer subsidies, Yin said.
“If it rains in the next little while, we might get the same yield as last year,” Hu said.
Any drop in output this year doesn’t mean China will have supply problems or need to import wheat immediately to feed itself because there are enough stockpiles to plug any shortage, Shanghai JC’s Li said. Production exceeded demand by 8 million tons while China’s net imports were 502,000 tons in 2009-2010, U.S. Department of Agriculture data show.
The drought in wheat-growing regions may persist into March and rain may come “too late” to avert damage to crops, Jim Dale, senior risk meteorologist at British Weather Services, said in interview published yesterday. China may increase wheat imports to bolster domestic reserves when prices ease, Tom Puddy, head of grain marketing at CBH, said yesterday.
The overall area affected by drought has declined, according to the central government. About 36 percent of winter wheat planted in eight major growing provinces were affected, and 6 percent were under “severe drought” as of Feb. 14, the Ministry of Agriculture said Feb. 15. That compared with 42 percent and 9 percent as of Feb. 9, according to the ministry.
Nie Zhenbang, director of China’s State Administration of Grain, said grain supply is in balance with demand and stockpiles are ample.
In past times before irrigation, drought damage to young wheat plants was irreversible, said farmer Li Zhongchun. This year, “it won’t be a complete loss,” Li said. After all, “this is the home of Confucius, and even the heavens will have to spare Confucius some face.”
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