China counts cost of floods
The total impact on agriculture is hard to evaluate but cotton, wheat and rice seem to be worst hit, writes James Harding
The worst flooding in China's modern history has inundated an area of farmland roughly the size of England and Ireland put together, swamped the livelihoods of tens of millions of farmers and started to alter the outlook for world trade in a number of key agricultural commodities.
And the crisis is not over yet. Yesterday, Chinese authorities warned that heavy rains were expected to hit flood-stricken areas today, threatening to breach more dykes and bring further devastation.
Nor is the flooding the only problem. This summer has not only been the wettest in decades, but also the hottest on record in parts of China, where drought has damaged summer output and hampered planting of the year's second rice crop.
The damage to Chinese agriculture has been huge. As more than 21m hectares of land in some of the most fertile areas of the country have come under water, the summer grain harvest has been cut by 11m tonnes and the ministry of agriculture is now forecasting that China may be unable to meet its grain production target of 492.5m tonnes for 1998.
It is difficult to evaluate the total impact on Chinese agriculture as the crisis continues but cotton, wheat and rice appear to be worst hit.
Cotton is widely grown along the central reaches of the Yangtze valley, the area most affected by the unusually fierce seasonal flooding. Farmers have reported that the crop was first damaged while much of it was in flower. The plants were then stewed for weeks in water and hot sun.
Analysts and officials are still calculating the scale of the damage and watching the weather over the next two weeks, which will be crucial for the cotton crop.
A drop in cotton production is likely to mean little for would-be importers to China, as it has a substantial cotton mountain, but might diminish the prospects of Chinese exports.
"The Chinese were talking about exporting cotton, but they may be less likely to export if they have a shorter crop this year," says one industry observer.
The spread of flooding to north-eastern China has raised concerns about the impact on the country's main wheat-growing area and fuelled expectations of wheat imports.
The US Department of Agriculture reported last week that "projected 1998-99 global wheat production is down from last month, led by an 8m tonne reduction in China's crop". This is largely a reflection of the lower than forecast harvest of winter wheat in the spring, damaged by severe weather earlier this year.
However, with the possibility of further checks on Chinese wheat output as a result of the floods, there is speculation about possible demand for overseas wheat.
"Recent trade reports point to a smaller and quality impacted 1998 wheat harvest, making a rise in Chinese wheat imports an enticing possibility," the USDA says. However, the prospect is tempered by China's enormous grain stocks and the possibility that changing government support policies may curb large-scale import demand.
The impact of the floods on China's rice production remains unclear. So far, officials have said there will continue to be a surplus and prices will remain stable. The USDA calculates that China's rice crop for 1998-99 has fallen by 2m metric tonnes to 138m tonnes. Arguably, the most serious effect will be a delay to the planting of the second crop.
Even before the terrible weather struck, Chinese farmers were having a difficult year. Three successive strong harvests have resulted in a glut in agricultural produce, which has driven some farm prices down by as much as 50 per cent this year.
The decline in farm prices has been a powerful factor behind the gathering deflationary pressures in the broader Chinese economy and has also held in check rural income growth. Beijing has indicated that the reduction in prices in a number of products has made it unlikely that agricultural incomes will rise sufficiently to reach the government's target of a 5 per cent increase this year.
Some officials, therefore, have started to offer a mildly optimistic interpretation of the flooding, suggesting the potential reduction in this year's farm output could ease pressure on China's swollen grain stores and revive prices.
But, much depends on when the rain stops - and not just for agriculture.
Yesterday, further concerns were expressed about the threat of the floods to China's largest oilfield, the Daqing wells in north-east China. Tens of thousands of soldiers were said to be in a "life or death" struggle to reinforce reservoir walls to protect the huge field, which accounts for well over a third of China's domestic oil production.
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