China food prices up 15%-to-25%

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.

The National Bureau of Statistics (NBS), however, has continued to release price information and their data show big increases in both farm and retail food prices. Since February 2009 NBS has been reporting average prices for 10-day periods. My calculations based on the November data show that most farm-level and retail food prices are up about 15%-to-25% year-on-year.

Here are some Statistics Bureau farm and retail prices with year-on-year changes from November 2009-November 2010:
Medium-grain rice 24% (retail up 23%)
Long-grain rice 17%
Wheat 11% (retail flour up 11%)
Corn 16%
Soybeans 13% (retail soy oil up 22%, tofu up 6%)
Rapeseed 18% (retail rape oil up 22%)
Peanuts 27% (retail peanut oil up 13%)
Cotton up 76%!
Live hogs 19% (retail pork belly up 16%)
Beef cattle and retail beef up 2% (not everything is up)
Sheep and retail mutton up 15%
Live chicken and retail frozen chicken up 16%
Retail duck up 12%
Retail eggs up 27%

This is not simply a reflection of "inflation," that is, it's not just a macroeconomic phenomenon. There have been many disruptions in ag markets due to weather, disease, and cycles. Every commodity has a different pattern of price increase over the past year. I will just show two examples, again based on National Bureau of Statistics data.

Pork markets were depressed during May 2009 and February to June of this year. Early this year, following the spring festival, there was an oversupply of pork and many pig disease outbreaks. Farmers began slaughtering hogs early and selling sick or dead hogs to slaughterhouses. All this depressed prices severely until June. The market recovered in July but as the peak consumption season arrived in September-October hog inventories were down about 3-to-4% from the same period in 2009. The short supply (plus rising feed and other costs) sent prices up sharply this fall.

Vegetable oil prices were more or less flat through most of this year. It was also just in the last few months that they shot upward.


The increase in food prices is very complex. Many different factors come into play. Chinese officials like to blame speculators. There is clearly a lot of money sloshing around in China looking for a place to go. Production costs are going up. Urbanization and highways are gobbling up land. Agriculture is both a cause and a victim of environmental degradation; environmental problems restrict supply by taking contaminated land out of production, restricting pesticide use, and banning livestock production near population centers. Weather does not always cooperate. Trade policies restricting imports (beef, chicken), drive prices up.

Also, the government's strategy of ratcheting farm prices upward has cemented in place expectations of ever-rising prices (along the lines of housing prices during the U.S. bubble period). When prices are expected to go up, farmers delay selling their grain, waiting for a better price. Millers and processors go out and try to buy as much as possible before prices go up. This process encourages price inflation.

While rising ag/food prices may not be simply a macroeconomic phenomenon, there is a general pattern of nearly all prices accelerating since August. There were been similar events in 2003 and 2007 that only lasted about 6 months.