Costly food for thought

Updated: 2012-05-10 07:31

By He Na and Yang Wanli (China Daily)

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Higher prices cause concern for market stallholders

At 2:30 am, Li Aiguo was already out of bed. His days have started at this hour for the past three years, and he has become accustomed to waking early, even without the help of an alarm clock. Li needs to rise early, though, because the 45-year-old has to drive 50 kilometers to his destination, Xinfadi, Beijing's largest wholesale center for agricultural produce, to buy goods to sell from his 6-square-meter stall in Tianlihong Market in Chaoyang district,

"It's the best driving experience in the capital. The traffic conditions are just fabulous," he laughed, yawning because of a lack of sleep.

With the recent surge in the price of vegetables, vendors such as Li should be happy, but instead he and his family are worried.

"The (wholesale) price of vegetables has doubled from the same period last year, but we don't know why," said Li's wife, Liu Xiulan. Cabbage, eggplant and sponge cucumbers are the three vegetables that have registered the most rapid rises. A sponge cucumber, no more than 30 centimeters long, costs roughly 6 or 10 yuan (95 US cents to $1.58) per kilogram.

However, the higher prices haven't translated into a higher income for Li and his family members.

Liu said it is even harder than usual to make money this year. "People are unwilling to pay more and we have had to cut our profit margins," she admitted.

Like many other stallholders at the market, Li and Liu are not originally from Beijing. Instead, they moved from Anhui province in the hope of making a better living in the capital. However, their basic primary school education means that job options are limited and selling vegetables is their only real option.

Along with their 22-year-old son and his wife, Li and Liu live in a basement measuring 20 square meters, for which they pay a monthly rent of 1,200 yuan. The rent for their stall comes in at another 2,000 yuan per month, and so they have no chance of saving money.

Their son, who works as an intern in an express company, is the main hope for the family. "He is strong and has a good personality. Now he's got a job, we will be much better off," smiled Liu.


Meanwhile, a long winter, low temperatures in the main vegetable-producing areas in March and April, and crop diseases and insect damage have exacerbated the shortfall.

Qin Peipei, director of the business department at the Shouguang Shangqing Agricultural Specialized Cooperative said the low temperatures resulted in poor crop yields. Moreover, the prices charged by the producers have also increased. Cabbage, for example, has risen to 1.4 yuan or 1.5 yuan per kg, twice the price of the same period last year.

And it's not only cabbage, other vegetables have also been affected.

"Usually by May, eggplants, cultivated in plastic shelters, are already ripe. But this year, only a small proportion have ripened, and they're small," according to Zhang Xueshan, a farmer from Cangshan county in Shandong province.

The increasing cost of labor has also been one of the main factors pushing up prices, he said. "The labor shortage has become a serious problem and affects many industries."

Petrol price hikes

Ma Wenfeng, an agricultural analyst from Beijing China Agro Consulting Co, said that two recent hikes in the price of petrol have to be taken into account when considering the soaring cost of vegetables."The petrol price increases have also pushed up vegetable prices. There's a correlation between the two: generally every time the price of petrol rises by 4 percent, vegetable prices increase by 3 percent," said Ma.

Recent research conducted by the price bureau of Hainan province supported Ma's theory. The cost of transporting 1 kg of vegetables from the province's main supply bases in Kunming, the capital of Yunnan province and Nanning, the capital of the Guangxi Zhuang autonomous region, rose by 0.50 yuan to 0.54 yuan after the petrol price hikes.

The high fees charged by logistics services are another important reason for the price surge. Statistics from the China Logistics Association show that total logistics costs accounted for 18 percent of China's GDP in 2011. Although the figure has declined slightly from the 21 percent recorded in 2009, compared with the 10 percent level seen in many developed economies, the figure is still high. Generally, logistics account for 50 to 70 percent of the price of vegetables.

"To say that the high cost of logistics could become an obstacle to China's economic development is no exaggeration. The high fees charged by logistics services are one of the main reasons that vegetable prices are soaring," said Xu Guangjian, deputy director of the School of Public Administration and Policy at Renmin University of China in Beijing.

"One possible way to lower logistical costs would be to reduce the current highway charging criteria, and strengthen the management of road tolls to deter illegal charges, fines and the setting up of illicit toll gates. We should also reduce the number of intermediate links," he said.

Professor Zhang said a uniform charge for logistics services is also essential. The industry is poorly organized as a whole, because most operators are small or medium-sized companies with insufficient economies of scale.

"The more intermediate links involved, such as wholesalers and retailers, the higher the vegetable price. The best way to reduce prices would be to establish special logistics companies to deliver vegetables directly to the community markets in cities. Some districts in Beijing have organized direct vegetable transportation, which is a good way of reducing prices and should be promoted," she said.

"Blind" cultivation

"Because of their limited education, most farmers still find it difficult to make full use of information shared through the Internet. Their cultivation plans are mainly based on the experience of the previous year and suggestions from other farmers, which often lack any sort of market research," said Li Yu'e, a researcher at the Chinese Academy of Agricultural Sciences.

"These growing plans are often "blind" because most of the dealers in agricultural produce haven't signed production contracts with farmers.

Sluggish sales of some vegetables or fruits, a common phenomenon in recent years, for example potatoes in Shaanxi province and bananas in Hainan, have dampened farmers' enthusiasm to grow those crops," she said.

Costly food for thought

A stallholder holds a sign showing the price of cucumbers. Wang Jing / China Daily

Li said that a national agricultural information service platform should be established, through which real time information on supply and demand could be sent to farmers' mobile phones. That could help to avoid wide price fluctuations and would also alleviate the situation whereby some farmers suffer diminishing returns and earn less even as their output increases.

"Local agricultural departments may also set up special units or assign special staff, preferably at least one in each county, to help farmers decide which plants to grow," she said.

Professor Zhang suggested that one way to minimize price fluctuations would be to store vegetables within easy reach of cities, but she admitted that more flexible solutions must be found.

"To stabilize vegetable prices, the ministry of agriculture should formulate a long-term plan to establish production bases near the cities they supply, to help reduce the number of intermediate links and logistics costs," she said.

Jin Zhu contributed to this story.

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