(Reuters) – China needs to reform grain prices and invest more in technology to ensure food security in the face of rapid urbanization, an influential think-tank chief said in an interview.

“China’s grain production is not a problem, the major concern is government policy — policies in grain prices, agricultural science and technology investment, inputs and markets,” Shenggen Fan, director general of the Washington-based International Food Policy Research Institute (IFPRI), said at the Reuters Food and Agriculture Summit.

Beijing has increased spending on seed development and the use of high-quality seeds in the past decade, giving the country plenty of potential to raise crop yields, Fan said.

“For grains, I don’t think China will see a big volume of imports in the next five years, though it will still need to import oilseeds,” said Fan.

China is already the world’s top soy importer, buying almost half of the amount traded in the world market. Its appetite for soybeans has risen partly thanks to changing Chinese palates.

As people eat more meat, China needs more animal feed, which is produced from ingredients such as soymeal and corn. That has prompted concerns that China will need to turn to corn imports, but Fan said this worry was overdone.

“Planting of more hybrid corn also means there’s lots of potential for China to raise corn yields,” he said.

As well as investing in seeds, the government also subsidizes farm costs such as machinery and chemical fertilizer, helping to produce enough for China’s 1.3 billion people.

“China’s food security is global food security,” Fan said.

WHAT’S GROWING? CITIES

China’s urbanization drive, now on top of the government agenda, however could threaten the country’s farmland if expansion of industrial parks and other infrastructure is not restricted, said Fan.

Beijing hopes to spur vast rural consumption by building small and middle-sized cities, but illegal trading by local village officials for short-term profits also puts farmland at threat, the social and legal committee of China’s political advisory body, the CPPCC, said last week.

Urbanization is a must for China, but a mechanism should be introduced to stop local officials profiteering, Fan said.

China’s urban population, with per capita incomes three times higher than rural households, also needs to shoulder more of the burden of supporting farmers.

“The government gives too much protection to urban consumers, but not to growers. Farmers have not profited from higher food prices, while much of the profit has gone to urban consumers,” he said.

In some poor areas, grains contribute the majority of farm incomes while accounting for less and less of urban residents’ spending, which increasingly goes into education and real estate.

“The government could offer subsidies to people on low incomes and pensioners and the unemployed. Keeping prices too low benefits poor people but also rich people. But low grain prices also means farmers are unwilling to grow more.”

Beijing worries that high food prices could cause social instability and hurt the economy. Premier Wen Jiabao has voiced concern about prices, saying China’s agricultural production will be a decisive factor in keeping inflation in check this year.

source from:http://www.reuters.com