China raises rice purchase prices

China's top economic planning agency said Tuesday that it will raise the minimum purchase prices for mid-season and late rice in 2012, as severe droughts in the United States and other grain-producing countries have driven up food prices in the global market.

The minimum purchase price for mid-season and late indica rice will be raised to 2.5 yuan (39.4 U.S. cents) per kg, up 16.82 percent from a year earlier, according to a statement by the National Development and Reform Commission (NDRC).

Meanwhile, the minimum purchase price for japonica rice will be set at 2.8 yuan per kg, up 9.38 percent from last year, according to the NDRC.

The new prices will be effective in Jiangsu, Anhui, Jiangxi, Henan, Hubei, Hunan and Sichuan provinces and the Guangxi Zhuang autonomous region from Sept. 16 to Dec. 31 this year.

In northeast China's provinces of Liaoning, Jilin and Heilongjiang, the new mimumum purchase price for rice will be applied from Nov. 16, 2012 to March 31, 2013 due to different climate conditions, said the NDRC.

According to the scheme, if the market price of mid-season and late rice remains below the minimum purchase price for three consecutive days, the state-owned China Grain Reserves Corp. will intervene and buy the rice at the minimum purchase price.

China has raised its purchase price five years in a row to safeguard food security.

Rice and wheat are the two biggest grain crops in China. Domestic grain output rose to 571.21 million metric tonnes last year, marking the eighth consecutive year of growth.

The country's policymakers have been careful in encouraging farmers to plant more crops to ensure abundant food for China's 1.3 billion people, especially at a time when global grain prices have risen sharply due to droughts in the U.S. and Russia.

The U.S. Agriculture Department estimated that this year's corn harvest will drop 13 percent from last year to the lowest level seen since 2006 in the United States.

The disappointing projection has prompted world traders to build up their stocks and has pushed up corn prices over 50 percent since the end of May.

Other major grain producers, including Russia, Ukraine and Kazakstan, have also predicted shrinking grain production amid severe droughts this summer.

Grain prices rose 3 percent year-on-year in China in July, marking a monthly average growth of 4.1 percent since January, according to the National Bureau of Statistics (NBS).

China's summer grain output rose 2.8 percent year on year to reach 129.95 million metric tonnes this year, marking the ninth consecutive year of summer growth, according to the NBS.

Summer harvests account for about 30 percent of China's annual grain output.