China to Spend $2 Billion to Fight Drought, Boost Grain Output in forex trading

China, the world’s biggest grains consumer, will spend 12.9 billion yuan ($1.96 billion) to bolster grain production and fight drought, in forex trading, China Central Television reported today, citing Premier Wen Jiabao.

The country should use reserves, imports and exports to balance the grain market and is able to keep overall consumer prices basically stable, CCTV cited Wen as saying.

China, the top wheat consumer, is enduring a prolonged drought in its main growing region, according to Minister of Agriculture Han Changfu. Speculation production will be cut has helped push wheat in Chicago, the global benchmark, to the highest level in more than two years and prices in China to a record. The government is seeking to curb inflation which may have quickened to a 30-month high in January.

About 42 percent of the total area planted with wheat in China’s eight major producing provinces has been hurt by a dry spell that may last into the spring, according to minister Han. Rain on the North China Plain has been “substantially” below- normal since October, according to the UN Food and Agriculture Organization on Feb. 8.

Drought could force China, largely self-sufficient in wheat, to buy more from overseas, according to Jason Britt, an analyst at Central States Commodities Inc.

Snow has fallen in drought-hit provinces including Hebei, Shanxi, Henan, Shandong, Jiangsu and Anhui since yesterday which will help relieve dryness, the National Meteorological Centersaid on its website. Henan, the top grower, had on average 5.5 millimeters of snow and some areas got as much as 23 millimeters, the weather agency in the province said.