Grain Prices and Discontent Predicted to Rise in China

March 23, 2011 2:35 pm Last Updated: October 1, 2015 5:17 pm

News Analysis

COSTLY TOIL: A farmer bundles dried stalks of wheat in a field in Cangzhou, in China's Hebei Province February 2009. Grain prices are expected to rise presenting China's Communist Party with a dilemma. If the CCP lets the price rise, the urban poor will be negatively affected, if it artificially lowers prices, farmers will face inflation. (Frederic J. Brown/Getty Images)
COSTLY TOIL: A farmer bundles dried stalks of wheat in a field in Cangzhou, in China's Hebei Province February 2009. Grain prices are expected to rise presenting China's Communist Party with a dilemma. If the CCP lets the price rise, the urban poor will be negatively affected, if it artificially lowers prices, farmers will face inflation. (Frederic J. Brown/Getty Images)
An agricultural nation, China might seem to be insulated from concerns that rising food prices would affect political stability. However, grain prices in China are predicted to rise steadily in the coming years, and as the prices ratchet up, a dilemma the rising prices pose for the Chinese Communist Party (CCP) intensifies.

The price of grain in China is, compared to most other nations, relatively independent of international prices.

Of course, all official statistics in China, including food statistics, must be taken with a grain of salt. According to official statistics, China has been doing better than most nations in weathering the storm of the recent worldwide surge in food prices.

Chen Xiwen is the director of the rural development office, a decision-making group under the umbrella of the CCP. He told Guangzhou Daily on March 13 that if one compares grain prices in March this year to March 2010, the price increase is less than 20 percent. The average grain price increase in China has been only one-fourth or one-fifth of the international average for the period, according to Chen. An International Monetary Fund report says that grain prices rose 60 percent in 2009–2010.

The statistics say China’s relatively lower inflation rate for food prices is due to its homegrown agricultural productivity.

In August 2010, Haitong Securities released a report saying that China has large food stores. While the internationally accepted standard is for a nation to maintain food stores that equal 17–18 percent of food consumption, China has food stores equal to 40 percent of food consumption, according to the report.

Data from the Ministry of Land and Resources shows that for the past 10 years, China’s agricultural production has enabled it to be 95 percent self-sufficient in its consumption of grain.

If the rise of international grain prices were caused by natural disasters or extreme weather conditions, then China’s grain prices would be expected to increase due to increased international demand.

In general, though, China’s self-sufficiency in grain and ample food stores have helped protect against inflation.

Too Much Money, Too Many City Dwellers

Nonetheless, other causes are bringing higher food bills into Chinese homes.

Between 2008 and 2010, the Chinese regime spent 4 trillion yuan (US$586 billion) in economic stimulus. The stimulus has caused inflation in China to explode. According to the Chinese Bureau of Statistics, in December 2010 grain prices rose 14.6 percent and the consumer price index rose 4.6 percent.

The pace of urbanization is also putting pressure on food prices.

As more people live in China’s cities, the population that is not producing food increases. As the urban population increases, so too does the demand for purchasing food, and rising prices follow.

The western China megalopolis Chongqing, plans on adding 3 million residents in 2010–2011 and expects its population to increase by 10 million in the next 10 years. Other urban areas are also expected to register significant increases in population.

More Meat

As China becomes more urban, its population’s diet is changing. The consumption of meat is soaring.

According to the Bureau of Statistics of China, from 1989–2009, the production of meat, poultry, and milk increased from 3.2 million tons to about 14.2 million tons, an increase of 343 percent, which is equivalent to an annual increase of 7.7 percent.

Feeding the growing number of livestock raised to meet the demand for meat requires a greater consumption of grain, in particular corn. Data from December 2010 shows that China’s domestic consumption of corn has reached 158 million tons, an increase of 13.5 million tons compared to 2009, or an increase of 9.3 percent in one year.

This increased domestic demand for grain pushes up food prices.

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