China's drought likely to last, threat to winter wheat

China's ongoing drought in northern wheat areas is likely to last, putting the winter wheat crop in further jeopardy, the Ministry of Agriculture said on Thursday. Those regions that have benefited from rain or irrigation might suffer a recurrence of drought as temperatures rise, as wheat needs more water when the weather gets warmer, it said in a statement published on its web site.
The drought is also likely to spread further in northern wheat growing areas in the second half of this month with forecasts predicting drier and hotter weather than normal, the ministry added. "While the (overall) size of drought-affected land has shrunk, the anti-drought situation is still grim," Guo Tiancai, deputy chief of the ministry's team of wheat experts, said in the statement.
China's most traded wheat futures contract, Zhengzhou wheat for September delivery, fell 0.96 percent to 2,990 yuan per tonne on Thursday after snow in the north helped improve conditions. The government has stepped up irrigation efforts to relieve what is being described as the region's worst drought in half a century. Restrictions on industrial water usage have been imposed in order to guarantee supplies for human consumption and livestock.
China's response has been driven in part by concerns that grain shortages will add to inflationary pressures in the economy. Foreign ministry spokesman Ma Zhaoxu said on Tuesday that China's large stockpiles of grain would help minimise the impact of the drought on world prices.
The world's largest wheat producer, China has increased wheat imports over the past two years, but the rise was driven mainly by cheap global prices and a search for higher quality wheat, rather than domestic shortages. The drought, which began last October, has caught the attention of investors around the world after natural disasters in Russia and Australia as well as poor crop conditions elsewhere threatened supply. Stronger demand and abundant speculative cash has also helped to boost prices over the past six months.