Dim Sums: Agricultural Markets in China

Last month this blog reported hockey-stick Chinese price increases for certain industrial commodities  since the Iran war began in late February that were as high as 40-to-77% for plastics, fuel, and chemicals. Gasoline and diesel prices eased somewhat during April, but elevated prices for sulphuric acid, liquified natural gas, and lithium persisted into the first 10 days of May. The spike in polyester prices has stimulated a rebound in cotton use, but agricultural prices are mostly insulated from the crisis so far. China's April 2026 PPI  shows a modest trend of rising prices that seems to have turned around the deflationary tendency that plagued the Chinese economy last year. The average price for industrial raw materials rose 1.2% in March 2026 and 2.1% in April. These were the first month-on-month increases exceeding 1% in the past year. A year ago at this time the raw material price index was declining--it was down -0.7% between March and April 2025.  An update of pr...

The Iran war has hit Chinese prices of chemicals and fuel hard, but most prices -- including farm prices and fertilizer -- have risen at a modest pace of 5% or less since the war began in late February. Pesticide prices have shot up in sync with the 30-to-40% increases in other chemical prices.  The impact of the Iran war is hard to discern from China's official price reports, but they indicate impacts are concentrated on fuel. The March CPI was up 1% year-over-year, but it fell 0.7% between February and March. Consumer prices for energy used for transportation stood out from all other categories with an increase of 10% in March. Producer price deflation was reversed into modest inflation. The March PPI report showed ex-factory prices rose 0.5% in March after falling 0.9% in February. Producer prices for gasoline and natural gas stood out with a 15.8% increase in March, while producer prices for consumer items were down slightly. We can discern a more precise picture of the impac...

Stratospheric Chinese hog prices helped float prices of feeds and meat upward last year, but sinking hog prices this year may be exerting a downward gravitational pull on other prices as hog farmers fall underwater. Hog prices reported by China's National Bureau of Statistics (NBS) in May 2021 were more than 50 percent below their early January level and are now below breakeven levels for wean-finish farms and at or near the breakeven point for farrow-finish farms in China. Farmers have been selling hogs in a panic as prices fall in the offseason for Chinese pork consumption. Last week's Beijing Xinfadi wholesale market report said mainly large carcasses are arriving--super-sized "second-time fattening" hogs--but very small carcasses are also arriving as farmers slaughter immature animals to cut their losses. Another industry report commented that a fattened hog brought 3000 yuan in profit last year, but now loses 1000 yuan.  Source: China National Bureau of Statist...

Despite being a relatively primitive part of the Chinese economy, the country's agricultural sector is tied in to global financial markets. An example is the surprising correlation between Chinese gold and corn prices shown in the chart below.  Note: Cash prices from China National Bureau of Statistics, Ministry of Agriculture, and gold.org.   Chinese gold and corn prices have generally been on the rise since 2000. The link became more clear during 2009-11 when both prices rose at a robust pace. China's gold price peaked in 2008 and fell after the onset of the global financial crisis that year. Chinese corn prices fell later in 2008, along with nearly all other farm prices. Since then, monetary authorities in China, the U.S. and elsewhere have been in expansionary mode, and from 2009 to 2011 there was a steady run-up in both gold and corn prices. The Chinese gold price rose 118 percent from its low point in December 2008 to its peak in September 2011. Chinese corn pri...

On May 29, China's National Bureau of Statistics (NBS) released estimates showing rapid growth in average wages for private employers and non-private employers (state-owned companies). Annual wages paid by private employers increased by 18.3% in 2011 to reach 24,556 yuan. Manufacturing wages were up 20.1%. Annual wages paid by non-private employers (government and state-owed enterprises) increased 14.3% in 2011 to reach 42,452 yuan. By far, the highest wages reported were in non-private financial services (state-owned banks) at 91,364 yuan and non-private information and computer services 70,619 yuan. These numbers are not adjusted for inflation. The China CPI number of 5.4% for 2011 is often offered as the measure of inflation but there is wide variation in price increases depending on which index one looks at. So it's hard to say exactly what inflation is in China.  Wage growth numbers shown above were more than three times faster than reported CPI inflation. Howev...

Last week, the Farmers Daily contained a long article explaining why vegetable prices increased in 2010 . The article notes that the rapid increase in prices attracted a lot of attention and prompted the central government to issue a series of 16 policies to address the issue. According to the authors, a clear understanding of the reasons for rising prices is necessary in order to make good policies. Many factors contributed to rising prices. While some regions had unusual weather last year and urbanization gobbled up land, the article insists that supply and demand are basically balanced. Ministry of Agriculture statistics show that acreage planted in vegetables went up 8 million mu last year. Rather, the article points to rising costs in each stage of the supply chain as the main reason. The author argues that rising costs are not unreasonable and points out that profits need to be spread evenly among the various actors--farmers, traders, retailers--to preserve a stable long-term sup...

Cold temperatures in Guizhou Province are making transportation difficult and causing increases in the prices of some necessities. Guizhou officials have announced subsidies and regulations to address the rise in food prices . A "Price Adjustment Fund" has been set up. Trucks transporting fresh ag products can get subsidies, there are awards to agricultural markets so they can eliminate vendor fees and subsidies for warehouse costs. There is a "hog slaughterhouse subsidy mechanism," and a subsidy of 30 yuan per head to transport hogs out of production areas to designated slaughterhouses. Local officials are to make sure basic foods are available, ensuring that vendor stalls in markets are manned and do not run out of stock. There are subsidies to help poor people buy coal and there are subsidies to farmers in coal-producing areas. Another thrust is to monitor and regulate prices. Vendors in Guiyang's 8 supermarkets and 47 wet markets have been ordered to keep pr...

Shandong Province announced a new mechanism for controlling agricultural prices to start this year. The system's goals are to stabilize agricultural prices and protect the interests of both the urban poor and farmers, while "tilting" the benefits of rising prices toward farmers. The system is referred to as "one fund, one reserve, two guarantees." The "fund" is a special fund for agricultural product subsidies. The "reserve" refers to a complete commodity reserve system that is intended to buy and sell commodities to stabilize prices. The "two guarantees" refers to income thresholds for receiving welfare payments that links subsidies for low-income people to the rise in prices. Details on the program are sparse. The "tilting" of benefits is not explained. It is probably intended to somehow prevent speculators and traders from earning all the profit when prices are rising. Other measures for reducing agricultural prices in...

Today's Peoples Daily features an article about the government's policy of putting more money in peoples' pockets to boost domestic consumption . This year's macroeconomic policy mantra is to change the structure of the economy by expanding consumer demand. The article says that a "bulging money bag" is the best way to improve peoples' livelihood, boost consumption, and allow "more people to enjoy the results of development." The article cites four major ways that the government has put money in rural peoples' pockets: raising minimum wages, raising minimum purchase prices for grain, increasing farm subsidies, and increasing loans for farmers. With all this extra money being poured into rural peoples' pockets, it's no wonder food prices are going up. The central government has pressured provinces to institute, increase, and enforce minimum wages. All provinces have now set minimum hourly and monthly wages. Shanghai has the highest mon...

An article from the Xinhua News Service suggests that the rising price of vegetables is a signal that China's economy is entering a new era of high costs. According to Sun Jitao, one of the 30,000 or so traders at Beijing's Xinfadi wholesale market, business is getting worse for vegetable traders. By noon, Sun had sold about a third of the vegetables from his truck. He may make 1000 yuan in a day but he has to split it with seven partners. With the rising purchase cost of vegetables, plus packing, transportation and labor, it's not uncommon to lose money on a truckload. Another trader named Wu selling home-grown ginger complains about the rising cost of production. She said laborers were paid about 7 yuan per hour last year, and this year they can't find workers at 9 yuan per hour (about $1.30). She says it now costs over 8000 yuan to plant one mu of ginger. She says recent government policy measures led to a drop in ginger prices. She thinks people who bought ginger a...

The China Price Information Center is supposed to monitor and report prices to inform policymakers, consumers and businesses about price trends. Normally they post average food prices for about 40 items for three 10-day periods about a week after the end of each month. Now there is more interest than ever in Chinese food prices, so what does the China Price Information Center do? They stop publishing price information. As of December 13, the web site has only posted an abbreviated report for the first 10 days of November with 8 prices: tofu, three kinds of sugar, salt, soy sauce, vinegar, and milk. This is a reminder of the unique role of statistics in China: they are for leaders to know what's going on (although even people in government don't get accurate statistics and discuss among themselves which numbers to believe). Statistics are not for the public. They are only released to the public if they show good news or agree with some other story the leaders want you to hear. T...

On September 28, a glowing report from the Ministry of Agriculture carried on many web sites announced that the fall grain harvest is well underway and it looks like another year of big grain production. According to MOA, the area planted in fall-harvested grain is up 10 million mu (1.5 million hectares) and yield is on an upward trend in all regions. The MOA report gives no concrete evidence for the rosy forecast. Instead it lists this year's serious setbacks -- a horrendous drought in the southwest last winter, cold temperatures in eastern provinces, serious flooding this summer. The report does recount all the efforts made by "central leaders and comrades" to guide anti-disaster work. The State Council held many special meetings, subsidies for special seeds and machinery purchases were increased, other subsidy funds were given out earlier, minimum support prices for rice and wheat were raised. The Ministry requires agriculture officials at all levels to resolutely carr...

Today, in an interview with a Xinhua news service reporter , Peng Sen, the vice chairman of the National Development and Reform Commission concurred that "hot money" flows were one of the factors driving up prices of some agricultural commodities. According to Peng, drought and low temperature at the beginning of the year set off rises in japonica rice and vegetable prices. Then medicinal herbs started rising in March and April. At the end of April and early May garlic and bean prices started rising a lot. The retail price for dried garlic reached 8 yuan per jin, and mung beans are over 10 yuan in some supermarkets. In May, new garlic came on the market and the price already started falling. Now the new garlic price is already down to 2 yuan per jin. (Yesterday's post on this blog shows that the garlic situation is more complicated than portrayed by Peng.) Peng said there was also some investment capital going into markets for garlic and mung beans--products where the pro...

Rising prices can gain momentum when an inflationary mindset becomes entrenched and hoarding behavior pushes prices ever-higher. In the 1970s, the United States got so desperate to tame inflation the Gerald Ford administration initiated a short-lived "Whip Inflation Now" with little WIN buttons. China doesn't have a serious inflation problem yet, but Chinese leaders are trying to head off any inflationary psychology. Toward this end, on May 14 the National Development and Reform Commission (NDRC) price office distributed a question and answer document to reassure the public that inflation is under control. The National Bureau of Statistics' CPI for April showed a year-on-year increase in prices of 2.8%. The NDRC deconstructs this number to explain why it's not a problem and that inflation will be kept under the government's target of 3% for this year. Increases in grain, fresh vegetable, and fruit prices account for 1.1 percentage points of the increase, mainl...

China's CPI still seems to indicate "inflation" in food prices, but most prices seem to be on the way down. The August CPI overall shows 4.9 percent inflation and meat 8 percent. Average retail prices through September reported on the Price Bureau web site show that prices are falling and close to their year-earlier levels. An article on the Ministry of Agriculture web site refers to plummeting hog prices in "Hog Industry Black September" and uses language like "disaster" and "landslide" to describe the hog price situation. As reported earlier on this blog, prices are falling below break-even levels and there is a growing sentiment among farmers to start reducing hog inventories. Vegetable oil prices are still above year-earlier levels, but falling: Pork and cooking oil experienced the biggest price hikes in 2007. Looking at Chinese cabbage (Da bai cai) as an example of a quite different food commodity, we see a spike around the February wint...