Grain Prices and Discontent Predicted to Rise in China

An agricultural nation, China might seem to be insulated from concerns that rising food prices would affect political stability.
Grain Prices and Discontent Predicted to Rise in China
3/23/2011
Updated:
10/1/2015

News Analysis


<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/85076979Chinafarmer.jpg" alt="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)" title="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)" width="320" class="size-medium wp-image-1806483"/></a>
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.

Read More... Farmland Reduction


Farmland Reduction


While food demand increases, China’s agricultural capacity, as measured in available farmland, is steadily decreasing.

According to a Xinua article on Feb. 24, the Committee of Agriculture and Rural Affairs of the National People’s Congress reported China’s farmland totals 1.826 billion mu (300 million acres), which represents a decrease of 123 million mu (20.25 million acres) since 1997.

Other sources paint a picture of China’s cropland shrinking. China Youth Daily reported that from 2003 to 2008, China’s farmlands have decreased by 0.7 percent annually. A survey by the Ministry of Land Resources agrees with this number. It shows that in the past five years China’s cropland area has decreased by an average of 0.65 percent annually.

The steady decrease in farmland puts steady upward pressure on food prices.

A further expected spur to food prices in the coming years involves the price of oil. Seventy percent of China’s energy consumption relies on imports and the price of energy is only expected to rise, as worldwide demand increases and supplies dwindle.

Higher oil prices will lead to higher fertilizer prices. In addition, higher transportation costs will affect all aspects of life, including food costs.

Dilemma


The predicted increases in food prices will put the CCP under ever increasing pressure. Increases in the price of grain are not so significant for urban dwellers with high incomes, but for the large numbers of urban dwellers with low incomes, grain prices have a disproportionate impact on their well being.

The regime can attempt to damp down food price increases by releasing stored food. But if it does so, it will suppress the market price available to farmers. Farmers’ incomes will not be able to cover production costs, and then the 900 million Chinese farmers will become the victims of inflation.

If the CCP allows food prices to increase, then the 400 million plus urban residents with mostly medium to low income will be stretched to buy food. Any financial assistance to either the farmers or the urban middle and lower classes will only aggravate inflation, not a viable option.

Whichever course the CCP follows, food price increases will further aggravate an already restive population.

This article was first published in New Epoch Weekly.

Read the original Chinese article.