October 22, 2007

China to face grain price hikes on high production costs

China's grain prices would continue to rise despite nearly a year of increases, a leading agricultural policy maker told China Daily.

Rising production costs would make it increasingly difficult for the government to control price hikes, Chen Xiwen, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, told China Daily.

This is despite China expecting its fourth consecutive bumper food harvest this year.

Although China is in no danger of running out of grain supplies, prices will be higher based on production cost, Chen, who is also director of the Office of the Central Leading Group on Agricultural Affairs told China Daily. 

Production costs have risen 17 percent on-year during the first nine months of 2007.

China's wheat and corn prices have risen 10.2 percent and 16.1 percent in September, compared to the same time last year, according to the National Development and Reform Commission (NDRC).

Still, this is lower than the 47.3 percent and 75.1 percent rise in wheat and corn prices respectively in international markets, the paper said.

As China becomes more integrated into the global market, it is inevitable that its domestic grain prices would be affected by global developments, Huang Jikun, a think-tank agricultural expert with the Chinese Academy of Sciences told China Daily.

NDRC Vice-Minister Zhu Zhixin said last week at a sideline press conference of the 17th CPC congress that China's price level would remain high and growth rates may slow down.