Lidong Village - China has declared an emergency over a drought which could devastate crops and farmers' incomes, official media said on Thursday, threatening further hardship amid slumping economic growth.

The drought gripping parts of central and northern China has sent Zhengzhou wheat futures prices CWSK9 up 5 percent this week but physical prices W-EXWZGZ-GEN have not moved, with most investors confident the country's reserves and last year's big harvest can offset any fall in wheat production this spring.

But the drought could hurt the incomes of farmers in Henan, Anhui and other populous provinces when many have lost factory and construction jobs after China's growth faltered in late 2008.

The national Office of State Flood Control and Drought Relief declared a "level 2" emergency, calling it a "severe drought rarely seen in history", the People's Daily and other official media reported.

Zhang Zhitong, a deputy chief of the office, said local officials must make "fighting the drought and protecting seedlings a major task" and expand irrigation coverage.

The absence of rain or snow since November has affected 9.5 million hectares of farmland -- 37,000 square miles, or 43 percent of the winter wheat sources, the China Daily reported.

But almost 40 percent of drought-hit wheat areas in seven provinces had been irrigated, the Agriculture Ministry said on Wednesday, easing worries about lost crops.

The ministry said farmers in these provinces, including Henan, Shandong and Hebei, had irrigated 3.79 million hectares of wheat, accounting for 39.6 percent of the 9.5 million hectares hit by drought.

Sun Tongling, a farmer in Lidong village, near Xingtai in southern Hebei province, said his wheat crop was about normal.

"But it's true that it's been dry this winter with no snow," he said as he opened an irrigation channel into his crops. "We won't really know until March if there has been any damage."

Wang Baoxi, who was building a house near his crops near Xingtai, also blamed the lack of snow.

"You can see the wheat is a bit yellow already, but we're not allowed to irrigate here until after the Lantern Festival (on Monday), so there's plenty of water in the reservoir."

Analyst Ma Wenfeng told the China Daily the drought could reduce annual production in major wheat-growing areas by 2 to 5 percent.

"The severest-hit regions of Henan and Anhui will see their wheat harvest down by about 20 percent," Ma said.

Both those provinces are home to millions of migrant labourers who travel from villages to cities and coastal industrial zones for work.

The government said this week that around 20 million of the nation's 130 million migrant workers had lost their jobs because of the economic slowdown.