No Rain no Grain

Without rains harvest is threatened; expected grain shortage alters food prices, both domestically and internationally; inflation grows accordingly; discontent may turn to protest. This chain is a clear and present danger the Chinese Government must tackle. Once again, enemies are at home.
Emperors collapsed when their legitimacy to rule the country was questioned by the inability to supply food and to ensure prosperity to their fellows citizens. History may repeat itself: since 4 months not even a drop of water touched the huge fields (7.7 millions of hectares) of 8 Chinese Provinces (Shandong, Henan, Hubei, Anhui, Shanxi, Shaanxi, Gansu and Jiangsu). There, 80% of winter wheat is cultivated.
It is planted in autumn and, after a warm and humid winter, harvested in summer. Water is thus a vital necessity. “To have a summer harvest, the current pressing job is to protect winter wheat from drought,” said Han Changfu, Minister of Agriculture. His words echoed the statement of Premier Wen Jabao – “stabilizing consumer prices will be the most important task this year among the economic policies of the central government“– delivered when he was visiting the Shandong’s ravaged area.
The fertile Province, one of China’s granary, was hit by a very severe drought. If it will not be raining in February, one have to go back 200 years to recall such a calamity. A wide ranging plan has been financed and put in place with water channeling, pumping stations, little dams construction, availability of fertilizers. Still the eye-catching images are those of dying crops or boats tilted in dry lakes.
The international landscape, with drought in Russia, flood in Australia and snow storm in the US is not promising. Due to the limited supply, food prices doubled last year and now China’s appetite may worsen the situation. The nation is proud of its food self-sufficiency , for which it is n.1 both as producer and consumer. If China decides to buy wheat in the international market, the repercussions might be devastating on a market with short liquidity.
Last year, Chinese inflation for food topped 7.2% compared to the previous year. It contributes one third to the increase of the CPI, which reached 5.3% last January. Prices hiked, even if grain output grew 2,9% last year. The negative forecast cannot be minimized, so the State Council announced a 20% rise in price paid to farmers for their products (to stimulate their supply) and some subsidies to citizens to contain the inflation.
The other problem to face is the income differential between rural and urban population. The former, for the first time in many years, enjoyed in 2010 a better income than the latter. This path to a more equal and “harmonious society” might be hindered. Consequently, Beijing takes extraordinary measures. China never forgets that for a still developing country, to feed its citizens is the most important task.