Raising prices to combat inflation?
There's something about raising prices to curb inflation that doesn't make sense in my logical mind. That dissonance suggests to me that the real problem is raising enough grain. Could it be that there will be a shortage next fall? If so, what will the government need to do then?China hikes minimum grain purchase prices to fight inflation
"China has raised its minimum purchase prices for rice and wheat for a second time this year to encourage grain production and curb inflation, the National Development and Reform Commission (NDRC) said on Friday..."The NDRC also said that the minimum price system would be expanded to cover the northeastern province of Liaoning, which would become the third province -- after Heilongjiang and Jilin --to have minimum prices. China began setting minimum purchase prices in 2004 to encourage production...
"Costs of farming inputs, including fertilizers and seeds, have risen, adding upward pressure to farm produce prices...
"It sends a signal to farmers that planting crops means making money, which is important because grain prices will only stabilize if supplies are guaranteed, Song Hongyuan, the deputy director of the Research Center for Rural Economy under the Ministry of Agriculture, said..."
See also:
- China raises rice, wheat prices for farmers in bid to boost production, cool inflation
- Counting the cost of wheat price hike
- China's Shrinking Rice Crop Sparks Price Boom, Supply Concerns
Labels: China, economics, politics
posted by Ken Wedding @ 8:22 AM
4 Comments:
And in related news (see last paragraph).
High Rice Cost Creating Fears of Asia Unrest
"Rising prices and a growing fear of scarcity have prompted some of the world’s largest rice producers to announce drastic limits on the amount of rice they export.
"The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest...
" Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days — meant to ensure scarce supplies will meet domestic needs — drove prices on the world market even higher this week.
"This has fed the insecurity of rice-importing nations, already increasingly desperate to secure supplies. On Tuesday, President Gloria Macapagal Arroyo of the Philippines, afraid of increasing rice scarcity, ordered government investigators to track down hoarders...
"Several factors are contributing to the steep rice in prices. Rising affluence in India and China has increased demand. At the same time, drought and other bad weather have reduced output in Australia and elsewhere. Many rice farmers are turning to more lucrative cash crops, reducing the amount of land devoted to the grain. And urbanization and industrialization have cut into the land devoted to rice cultivation...
"Governments have been reluctant to tell farmers to sell their rice at low fixed prices, for fear that farmers would hoard rice or not bother to grow as much as they could. On Friday, China, which is virtually self-sufficient in rice, raised the minimum prices for rice and wheat that it guarantees to farmers."
Higher grain prices are not just in Asia. This report from Redwood Falls, a small town in southwestern Minnesota illustrates the global nature of the situation for farmers and customers.
Wheat prices high for now?
"Farmers and consumer have sat in amazement over the past few months watching the price of wheat ride a skyrocket to never-before-seen highs.
"The price of flour in the store, baked goods, bread and feedstock for producers have all gone up in price, in part due to the high demand for wheat on the global market...
"Wheat prices aren't expected to stay at their high end for too long, though. The International Grains Council in Dec-ember predicted global wheat acreage would increase 4 percent in the year ending June 30 from the previous year...
"Increased production should help replenish global inventories that the USDA says will fall to 110.4 million tons by the end of May, the lowest since 1978..."
Two elaborations on the price and supply of grain from The Economist.
Food for thought
"FOR years, anti-poverty campaigners railed against low commodity prices, which depressed farmers' incomes in developing countries. In recent months, the world price of virtually all staples has shot up, but the activists are still not cheering. They worry that this boom (intensified by “green” subsidies for biofuel crops) may worsen poverty even more than low agricultural prices did.
"High food prices do help poor farmers, but they also hurt the more numerous category of people (poor city-dwellers as well as landless rural folk) who must buy food to survive..."
Needed: a new revolution
"THE soaring price of rice and dwindling stockpiles of Asia's basic food are causing anxiety across the region...
"Until a few years ago, rising harvests satisfied the growth in rice demand caused by population growth and Asia's success in cutting poverty. But recent wobbles in output have reversed a long-term trend of falling prices. They have also left global stockpiles at their lowest since the 1970s.
"Political consequences may follow..."
Food riots fear after rice price hits a high
"A global rice shortage that has seen prices of one of the world's most important staple foods increase by 50 per cent in the past two weeks alone is triggering an international crisis, with countries banning export and threatening serious punishment for hoarders...
"Rice is the staple food for more than half the world's population. This is the second year running in which production - which increased in real terms last year - has failed to keep pace with population growth...
"Fears over the potential impact of the rice crisis has been heightened by estimates by both the UN Food and Agriculture Organisation - which has predicted the 3.5 per cent shortfall...
"Rapid recent price increases are also likely to have a dangerous secondary effect of stoking further inflation in emerging countries, which are already suffering from record oil prices and surging agricultural commodity prices..."
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