Friday, November 26, 2010

Soybean farmers left behind in price surge?

An article in the Daily Economy News reports that soybean farmers are complaining about the government's efforts to control commodity prices.

Corn, rice, and other prices have gone up this year and now the government is trying to stop prices from climbing. The soybean farmers' complaint is that soybean prices didn't go up as much as other prices and now they won't have a chance to catch up with other commodities.

According to He Shuwen, head of a soybean cooperative in Heilongjiang Province's Heihe City, soybean prices are about 1.9 yuan/jin this year, up from 1.87 yuan last year. This is not much compared with 10-percent increases for corn and rice. With the government trying to control prices, he says the 2-yuan price farmers hope for will be hard to attain. He says a lot of farmers are considering switching from soybeans to rice in response to the price difference.

Meanwhile, the government is reporting that rural household income is rising rapidly. In the first three quarters of this year, the government says rural incomes grew faster than urban incomes. The Ministry of Agriculture thinks the main reason is the government's decision to increase the minimum prices for wheat and rice, which influenced other prices to increase.

Not mentioned by the article, but lurking in the background is a looming conflict over China's price policies. Chinese officials want to keep farm prices rising in a slow, steady manner. They can do this for wheat and rice prices. But they cannot control soybean prices since they are set in the world market. Consequently, if officials try to manipulate wheat and rice prices, they will eventually be out of kilter with soybean prices which follow the forces of world supply and demand, not the whims of the National Development and Reform Commission. That's why China's domestic soybean-crushing industry is disappearing.

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