Most of China’s wheat production is in the North
China Plain in the central and eastern part of the nation,
where three provinces — Henan, Shandong and Hebei — produce
more than 50 percent of the national crop. These areas
are susceptible to drought and are dependent on irrigation
to cultivate wheat, a dependence that has contributed
to the depletion of water resources in that region.
This could restrict output in coming years (Lohmar
4).
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| Wheat fields in mountainous area of southern
Shaanxi, China. Photo by S. Willis. |
Chinese government policies on wheat production have
shifted several times during the past two decades,
as policy makers strive to satisfy both national security
concerns and market needs. In the 1980s, the country
imported as much as 13 million tons. Then, in 1995,
Chinese
policy-makers decided that the nation should be self-sufficient
in grain. To this end, local officials raised the price
they would pay for wheat, an incentive that led to
huge wheat harvests in 1997-98 — harvests that
were more than double those of the early 1980s. With
such
bin-busting numbers, inventories soared and imports
dropped off the charts (Hsu 1).
Gradually, stockpiles were reduced and imports, from
the United States and elsewhere, resumed, though they
have not recovered to the level of the 1980s. Production
has fallen, a reflection of a reduction in incentives
and of farmers switching to other cash crops, such
as horticulture products and cotton, which bring a
better
return. A soil and water conservation program that
provides incentives to farmers to revert cropland,
particularly
sloped or otherwise fragile fields, to natural vegetation
has also led to reductions in sown area (Lohman 4).
The Chinese government has also shifted from a call
for complete
self-sufficiency to one of primary self-reliance, where
farmers would produce 85 percent or 90 percent of China’s
wheat needs instead of 100 percent (Jiang and Gifford
4).
China's heavy production
of low-quality wheat has necessitated imports of
high-quality wheat. In turn,
China has been able to export wheat, often of feed
quality, to a number of countries, with South Korea,
North Korea, Vietnam, Hong Kong and the Philippines
representing the largest markets.
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| Stalks of wheat, Shaanxi Province. photo by
S. Willis |
To avoid stockpiling
large quantities of hard-to-move, low-quality wheat,
China's agricultural policy shifted,
starting in 1999, to try to increase the amount of
high-quality wheat grown, paying farmers a premium
for wheat high in gluten (Lohman 6).
While this policy was designed to meet the increasing
demand from food processors for high quality wheat,
the top-down, policy driven approach may not meet
the
needs of the market. Processors, for example, need low-gluten wheat, in addition
to high-gluten wheat. In addition, the premium paid to farmers has not always
compensated for the lower yields produced by high-gluten varieties.
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China’s wheat industry has been relatively slow to implement market-oriented
reforms. For example, China has only recently started experimenting with grading
wheat, and the buying and transport systems, designed to treat most wheat as
the same, don’t efficiently segregate different kinds of wheat. As a result,
poor-quality wheat ends up mingled with high-quality batches. As millers improve
facilities for segregating wheat types and increase payments to farmers for specific
qualities of wheat, a more robust domestic market system for specific qualities
and types of wheat is likely to develop (Lohman 6).
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| Wheat harvest in Shaanxi, China. Photo by S.
Willis. |
In 2004, the government also initiated new programs
to make direct payments to growers and eliminate
agricultural taxes. The aim of these policies,
to raise
rural incomes, may eventually undermine the nation's security policy of grain
self-reliance, as farmers shift to more profitable crops.
In the near future, however, government incentives and a price increase that
took hold after a short crop in 2003 are expected to result in increased wheat
acreage in the near future. Demand and imports are also expected to increase
modestly. As market-oriented reforms are implemented, the wheat market in China
is expected to stabilize at near self-sufficiency, with continued modest imports
(Lohman 8).
The Taiwan Wheat Market
Taiwan does not grow wheat and, in recent years,
has represented a steady export market for U.S.
wheat.
USDA predicts that Taiwan will import about 1.06
million metric tons of wheat in 2005, a slight decrease over
previous years. Over 85 percent of the imported
wheat is expected to come from the United States.
The remainder
is imported from Australia and India (Perng
and Trachtenberg). The Taiwan milling and baking
industry has sent many
professionals to Kansas for training and familiarization
with U.S. wheat purchasing and milling techniques
(Kansas Wheat Commission).
Taiwan millers purchase a variety
of wheat classes from the United States, including
white wheat for Chinese noodles as well as
red wheat. In late 2003, the Taiwan Milling Association
made
a commitment to purchase 1.7 million metric tons of hard
red wheat over a period of two years. Because
Kansas is the main producer of hard red winter
wheat,
most of that wheat is expected to come from
Kansas
(Kansas
Department of Commerce).
Next: Wheat in Korea
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