China drought threatens wheat production, prices have been rising: FAO [REPORT EMBEDDED]

A “severe winter drought” in China threatens to put wheat production at risk, stated a special alert from the Food and Agriculture Organization (FAO) of the United Nations.

The crop at risk is the winter wheat, which will be harvested in June.

Since October 2010, rainfall has been below-normal in the North China Plain, the country’s main production area. This puts the crops, currently dormant, at risk because thin snow covering reduces protection of the plants against frost-kill temperatures and jeopardizes the availability of soil moisture for the post-dormant growth period.

About 5.16 million out of 14 million hectares may be threatened in China, according to official estimates, stated the FAO report.

This drought in north China may have been partially responsible for the recent rally of wheat prices.

In China, where food inflation is already rampant, wheat flour prices in January 2011 rose 8 percent compared to two months earlier and 16 percent compared to a year earlier.

Meanwhile, US-traded wheat futures rallied 30 percent in the last four months as China, with its 1.3 billion population, will need to increase wheat imports if its own production falls short.

Fortunately, the drought hasn’t materially affected China’s wheat crops yet, the FAO report indicated.

However, the “situation could become critical” if a spring drought follows or if temperatures are colder than normal in February.

Email Hao Li at hao.li@ibtimes.com

Below is the report from the FAO: