Spike in prices rings alarm in vegetable industry

Updated: 2010-11-25 17:02


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BEIJING - Shanghai resident Wu Xiaoxia is in the habit of keeping a record of her daily expenses, including the money she spends on vegetables. According to her little tally book, prices have surged in the last few months.

"Spinach price almost doubled to 10 yuan ($1.5) per kilo from 6 yuan earlier this year. So did the price of broccoli, surging from 8 yuan per kilo to 12 yuan," said the middle-aged woman who shops every day at the vegetable market on the Xietu Road in Shanghai, China's business capital.

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"I felt the vegetable basket was getting heavier" said Wu, metaphorically referring to the burden on Chinese families caused by the spike in vegetable costs.

Vegetable prices have dropped over the last two weeks after China's central and local governments rolled out measures to rein in surging food prices, but people like Wu are still feeling the pressure.

A report by the Ministry of Commerce (MOC) said Tuesday that the prices of 18 types of staple vegetables for the week ending Nov 21 fell 2.6 percent from the previous week.

Despite being a good sign, the fall seemed to be trivial compared to the year's vegetable price inflation.

Another MOC report conducted during the first week of November showed that prices for the 18 vegetables across 36 cities had risen 62.4 percent from a year earlier. The average wholesale price stood at 3.9 yuan per kilo in the same period, up 11.3 percent from the beginning of the year.

Behind the price surge

In the past, vegetable prices were mainly affected by weather, fertilizer prices and seasonal consumption habits. However, according to experts, insufficient government support combined with China's fast growth, urbanization and rising costs in labor and transportation influenced the recent price hikes.

In Xinfadi market, Beijing's largest wholesale food market, management staff offered some explanations for the price rises.

"Who would grow vegetables anymore when apartments here now sell at 20,000 yuan per square meter," said Bao Yaoxian, a member of management at the market, pointing at a large group of under-construction commodity apartment buildings in the Xinfadi village on the southwest outskirts of Beijing, which used to be farmland for vegetables.

China's fast paced urbanization in recent years has encroached on suburban land used to grow vegetables.

"Vegetable farmland in suburban Beijing is decreasing sharply," said Liu Tong, head of the market's statistics department. "When farmland becomes buildings and growers become consumers, surely the vegetable prices will rise," he said.

Besides urbanization, a lack of government-backed policies also led to reductions in vegetable farmland, as many farmers tend to grow grain and oil crops which have government-set minimum purchasing prices and subsidies for fine seeds.

Also, the rise in labor costs also played a significant role in pushing up vegetable prices, said Liu Yuhui, an economist with the Chinese Academy of Social Sciences.

Unlike producing grain and breeding pigs, the process of growing vegetables can hardly be mechanized because of pollination and grafting. Therefore, the labor-intensive industry is very vulnerable to labor cost rises, said Chen Mingjun, deputy secretary general of the China Vegetable Circulation Association.

As many Chinese farmers have migrated to work in cities, they have to hire help to grow vegetables at home. The wages for help is approximating 100 yuan per month, up almost 100 percent since the beginning of this year, said a farmer from East China's Shandong province.

Though wages for those who help people grow vegetables have risen, it is still about 75 percent lower than the minimum wage for migrant workers in cities. "It seems the wage for help still has plenty of room to increase, therefore the vegetable prices will not likely decline in the long term," said Liu Tong.

Meanwhile, wholesalers and transporters also complained about the rising costs for fuel, fertilizer and the plastic sheeting and bubble chambers used to protect vegetables, which are feeding through the prices.

Measures and advice

To curb rising food prices, the State Council, China's Cabinet, Sunday announced a group of measures, which included orders for local governments to boost agricultural products and stabilize the supply of agricultural products.

The government also forbade road-toll stations to collect fees from vehicles transporting fresh agricultural products which included vegetables, starting from Dec 1.

The measures were implemented after food prices, which account for one-third of weighting in China's consumer price index (CPI), jumped 10.1 percent in October, pushing the index to a 25-month high of 4.4 percent after rising 3.6 percent in September.

Experts also suggested China should map out a plan for the development of the vegetable industry. The plan should include measures to check the reduction in vegetable farmland by supporting policies such as minimum purchase prices and seed subsidies and stricter market supervision, said Chen Minjun.

"The first thing to do is to find out exactly how much vegetable growing land we have in China and then we can stop the land from shrinking," said Chen.

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