'Food will cost more' due to US drought

Basic supplies safe but oil and pork prices to rise, expert says

The US drought will not endanger domestic food security but it is almost certain to result in costlier cooking oil and pork, experts said.

The drought, the worst in more than 50 years, will affect China but not to the extent that basic food supplies are threatened, Zhai Jianglin, vice-president of the Academy of Science and Technology at the State Administration of Grain, told China Daily on Thursday.

There is no indication of any need for the government to stabilize the market with strategic reserves of oil-bearing grains, he said. But he declined to comment on whether Beijing will use reserves in the following months.

Price hikes for soybean and corn in the international markets will affect domestic prices because of imports.

But "for other grains, such as rice and wheat, China has sufficient domestic supplies and will not easily be affected", he said.

Zhang Zhongjun, assistant representative of the UN Food and Agriculture Organization in China, said imports account for around 80 percent of the country's soybean supplies.

But, Zhang added, domestic grain supplies are adequate and there is even a substantial reserve program.

While corn prices will rise, China imports just 5 percent of its supplies, Wang Ruiyuan, vice-president of the Chinese Cereals and Oils Association, said.

Huang Guiheng, manager of Bric Global Agricultural Consultants, added that the US drought has already driven up domestic soybean prices significantly, as half of China's annual soybean imports are from the US.

The price of imported soybeans rose from 4,350 yuan ($685) per metric ton in April to 4,700 yuan in August.

"The global soybean price rise is unlikely to end until we find out more about the South American planting in November," he said.

China imported 34.92 million tons of soybean in the first seven months of this year, an increase of 20.1 percent from a year earlier, according to the General Administration of Customs.

China imported 52.64 million tons of soybeans in 2011. Agricultural specialists forecast that imports in 2012 will range between 55 million and 57 million tons.

Huang said that domestic soybean production will be around 9.8 million tons this year, against 10 million tons in 2011.

The rise in the price of soybean is not an isolated event. It will also push up the price of cooking oil and increase feed costs for pig farmers.

Consequently, pork prices might rise in the fourth quarter as could the consumer price index, a main gauge of inflation, Huang said.

The National Development and Reform Commission recently talked with five major edible oil suppliers, including COFCO and Yihai Kerry, to ask them to hold back price rises, media reports said.