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Spike in vegetable prices sparks calls for an industry overhaul
By Wang Yue and Li Yabiao |
November 27, 2010, Saturday
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Print Edition
Print Edition
WU Xiaoxia is in the habit of keeping a record of her daily expenses, including the money she spends on vegetables. According to her tally book, prices have surged in the last few months.
"Spinach almost doubled to 10 yuan (US$1.5) per kilogram from 6 yuan earlier this year. So did the price of broccoli, surging from 8 yuan per kilogram to 12 yuan," said the middle-aged woman who shops every day at a vegetable market on Xietu Road in Shanghai.
"I can feel the vegetable basket 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 governments - both central and local - rolled out measures to rein in surging food prices. But people like Wu are still feeling the pinch.
The Ministry of Commerce said in a report on Tuesday that the prices of 18 staple vegetables fell 2.6 percent for the week ending November 21 compared to the previous week.
Despite being a good sign, the fall seemed to be trivial compared to the earlier price gains.
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 kilogram in the same period, up 11.3 percent from the beginning of the year.
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 galloping urbanization and rising labor and transportation costs led to 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 the market's management staff, pointing at a large group of apartment buildings being built in 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."
Behind the surge
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 has 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 increases, said Chen Mingjun, deputy secretary general of the China Vegetable Circulation Association.
As Chinese farmers have migrated to work in cities, they have to hire help to grow vegetables at home. The wages for these workers is approximating 100 yuan per month, much higher than the pay at the beginning of this year, said a farmer from 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 rising costs for fuel, fertilizer and the plastic sheeting and bubble chambers used to protect vegetables, which eventually get passed on to consumers.
To curb rising food prices, the State Council, China's Cabinet, on Sunday announced a group of measures, which included orders for local governments to boost agricultural products.
The government also forbade road-toll stations from collecting fees from vehicles transporting fresh agricultural products starting from December 1.
The measures were implemented after food prices, which account for one-third of the Consumer Price Index, 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 from the vegetable circulation association.
"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," Chen said.
"Spinach almost doubled to 10 yuan (US$1.5) per kilogram from 6 yuan earlier this year. So did the price of broccoli, surging from 8 yuan per kilogram to 12 yuan," said the middle-aged woman who shops every day at a vegetable market on Xietu Road in Shanghai.
"I can feel the vegetable basket 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 governments - both central and local - rolled out measures to rein in surging food prices. But people like Wu are still feeling the pinch.
The Ministry of Commerce said in a report on Tuesday that the prices of 18 staple vegetables fell 2.6 percent for the week ending November 21 compared to the previous week.
Despite being a good sign, the fall seemed to be trivial compared to the earlier price gains.
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 kilogram in the same period, up 11.3 percent from the beginning of the year.
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 galloping urbanization and rising labor and transportation costs led to 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 the market's management staff, pointing at a large group of apartment buildings being built in 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."
Behind the surge
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 has 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 increases, said Chen Mingjun, deputy secretary general of the China Vegetable Circulation Association.
As Chinese farmers have migrated to work in cities, they have to hire help to grow vegetables at home. The wages for these workers is approximating 100 yuan per month, much higher than the pay at the beginning of this year, said a farmer from 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 rising costs for fuel, fertilizer and the plastic sheeting and bubble chambers used to protect vegetables, which eventually get passed on to consumers.
To curb rising food prices, the State Council, China's Cabinet, on Sunday announced a group of measures, which included orders for local governments to boost agricultural products.
The government also forbade road-toll stations from collecting fees from vehicles transporting fresh agricultural products starting from December 1.
The measures were implemented after food prices, which account for one-third of the Consumer Price Index, 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 from the vegetable circulation association.
"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," Chen said.
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