China warns of armyworm outbreak

China's agriculture authority on Tuesday warned local governments of an armyworm outbreak, pressing government departments to heed pest prevention and control advice to ensure grain security in the world's most populous nation.

A spokesman for the Crop Production Department of the Ministry of Agriculture (MOA) said the recent outbreak of armyworms in major grain producing regions in northern and northeastern China has posed a severe threat to the production of corn and rice in the country.

"We haven't seen such a pest plague in so many places in almost a decade," the spokesman said in a new brief on the MOA website.

To date, at least 2 million hectares of autumn crops nationwide have been affected by the outbreak in Hebei, Jilin, Liaoning, Heilongjiang and Shanxi provinces, as well as in Inner Mongolia autonomous region and Beijing and Tianjin municipalities, according to the MOA.

The spokesman said the MOA will allocate 200 million yuan ($3.5 million) in funds to support local governments' fight against pests after sending four inspection teams to Inner Mongolia, Heilongjiang, Jilin and Liaoning to guide pest prevention and control.

Provincial authorities have dispatched more than 70 working teams to the affected areas to step up pest control efforts.

China's worst armyworm outbreak in almost a decade synchronized with an upsurge in global grain prices after severe droughts in the United States, where the driest conditions in more than half a century has battered corn and soybean crops and brought larger losses than expected.

The U.S. Agriculture Department, based on its first samples from parched farmland this season, estimated the corn harvest will drop 13 percent from last year to its lowest level since 2006 in the United States, the world's largest grain producer and exporter.

It is also predicted that the country's annual soybean production will decline 12 percent from the previous year.

The disappointing projection inspired traders at the Chicago Mercantile Exchange to build up their stockpiles and has pushed up corn prices over 50 percent since the end of May.

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

"Skyrocketing global grain prices have been mainly pushed up by the weather, speculative orders and attempts by international monopoly groups to manipulate the market," said Ma Wenfeng, an analyst with the Beijing Orient Agribusiness Consultant Ltd..

Ma said China might not suffer the same shock as those in the global market, but such price fluctuations will definitely lift food prices in the country.

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).

Experts attributed this year's steady grain prices to the summer bumper grain harvest in China.

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

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

"We should not panic in the face of surging global prices," stressed Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, as 95 percent of China's grain is supplied by domestic producers.

Other experts, however, were concerned that a spillover effect from the global market will force China to reduce its imports of agricultural products.

Customs data showed that China imported a total of 8.68 million metric tons of grain and grain flour in the first seven months of this year, up 261.3 percent from the same period of 2011.

China's monthly soybean imports also rose to a two-year high of 5.87 million metric tons. Chinese soybean refiners rely on imports for about 80 percent of their supplies.

Wen Tiejun, president of the School of Agricultural Economics and Rural Development with the Renmin University of China, said the external volatility did have an effect on China's grain market, but the impact will be limited to products including corn and soybean.

Though rice and wheat, two staple foods for the Chinese, are unlikely to experience a drastic rise in prices due to abundant domestic production, according to Wen, China's corn imports are likely to be pounded by price shocks from international grain traders for the rest of the year.

Since corn is a key ingredient of animal feed, possible corn price hikes may lead to pressures in farming and livestock industries, he added.