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ECONOMY
Weekly Watch> WEEKLY WATCH NO. 30, 2010> ECONOMY
UPDATED: July 23, 2010 NO. 30 JULY 29, 2010
Grain Price Hikes
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Wheat purchasing prices have hit new highs since mid-June in China, but the country has enough grain reserves to guarantee domestic supply, said the State Administration of Grain.

China's summer grain output declined year on year for the first time after six straight years of growth. Even so, it's the third best harvest in the country's history. But prices of wheat futures have soared by up to 30 percent and at the spot market wheat prices exceeded the minimum purchasing prices the government set for the first time.

State-owned China Grain Reserves Corp. was held responsible for the price hikes, as it controls the bulk of grain reserves and can easily stabilize market prices for wheat, said the top grain regulator in a recent report submitted to the State Council.

Massive capital flows have pushed up the prices, too, said the report. More state-controlled enterprises, such as food manufacturer COFCO Ltd., compete in the grain market, and foreign companies such as Yihai Kerry of Singapore and Louis Dreyfus of France have joined the scramble for wheat in Shandong and Hebei provinces making competition fiercer.

Rising production costs, dramatic weather conditions and the government's stern measures to squeeze bubbles out of property and stock markets all account for the increases, said Yang Jianwen, a professor of economics at the Shanghai Academy of Social Sciences.

Speculative capital retreated from property, while stock markets found the agricultural produce market ideal because of its small scale and flexibility. But increases in grain supply in the second half of the year will help stabilize the grain prices and ease inflation pressures, Yang said.



 
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