Speculation, drought and hype behind price spikes

Updated: 2010-05-31 21:08
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BEIJING - Speculation is said to be one of the factors that push up prices of some agricultural products in China, with drought and commercial hype conspiring to the spikes.

Government's moves this year to cool down the property market has weighed heavily on the stock market, which saw speculative capital shifting to some other targets, such as the non-staple grains market, said Peng Sen, vice minister in charge of the National Development and Reform Commission, the country's top economic planner.

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Statistics from China's National Bureau of Statistics showed green mung bean cost nine yuan ($1.32) a kilogram in October in 2009, but had soared to 20 yuan by May.

Prices for black soy beans and glutinous rice have also gained remarkably, tracking spikes in other farm produce like garlic.

"Major mung bean production regions in China's northeast, southwest, and in Inner Mongolia suffered severe drought from last year. Production in some areas slumped 40 percent," said Chen Guoqiang, chairman of Hangzhou Grain & Oil Development Co Ltd.

Seasonal factors have contributed to the rise in price of mung beans, which Chinese people like to boil during the summer for drinking. The drink relieves the summer heat and prevents strokes, said Chen.

Many also blamed market speculation for the price surge. But even as prices have risen, trade has not been particularly active.

The Chinese government has vowed to crack down on hoarding and farm-produce profiteering in recent days.

The NDRC said China would crack down on vegetable hoarding and curb speculation to maintain market order.

It urged local governments to step up efforts to strengthen market monitoring and clamp down on speculators who force up the prices of agricultural products like green beans and garlic.

Profiteers' illicit earnings will be confiscated and they may face fines of up to 1 million yuan.

China's State Council, the Cabinet, also held a meeting last week saying it would strike hard against farm-produce profiteers.

Hype -- claiming "garlic prevents swine flu" or "mung beans protect your health," for example -- is also a trick merchants touting high-priced farm produce have used.

But impacts on China's overall inflation due to recent price spikes in some agricultural products will be limited, according to NDRC vice minister Peng Sen.

Peng said the consumer price index, a major gauge of inflation, would not be much affected by the price surge because the consumption of these non-staple agricultural products was relatively low and demand flexible.