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Price Hike for Grain Reflects Market

The current price hikes in grain and cooking oils in the national market are nothing but a normal recovery of their value from chronically low levels, experts have said.

The price surge has rendered gloomy Chinese farmers a glimpse of brighter prospects for raising their sluggish income growth, Han Jun, director of the Agriculture Department of the State Council Development Research Center, said Tuesday.

Since mid-October, the purchase prices of wheat, corn and rice have soared by up to 120 yuan (US$14.50) per ton, subsequently driving up the prices of salad oil, meat and other finished products in major cities.

The bump of grain prices - for the first time since 1997 - is a long-anticipated boon for farmers, Han said.

Largely due to low grain purchase prices, farmers, especially those in the more underdeveloped countryside areas, reap little money from sales of their products after deducting expenditures on fertilizers and payments for taxes and other fees.

To understand how huge the income gap between rural residents and urban dwellers is, it will take two decades for the per capita income level of farmers to match that of urban dwellers in 2000, said Chinese Academy of Social Sciences' Sociology Institute Vice-Director Li Peilin.

Ding Shengjun, an adviser to the State Grain Bureau, said the current price fluctuations are dictated by the market.

"The (current) price levels are quite normal and rational," Ding said. "It is absolutely abnormal for grain and cooking oil prices to have remained wretchedly low for so long."

Both Ding and Han said they believed the price rise will not substantially affect the lives of most urban residents, although some laid-off workers and other low-income residents may need extra help because of the price rise.

Most of the middle-level income households in the nation can afford the price changes of food, which on average, cost one-third of their earnings.

Experts also said the rise in Chinese grain prices will be moderated by the fact that prices of rice and other grains are already higher than on the world markets.

Even in September, the Free on Board (FOB) price of rice in the world market stood at 1,500 yuan (US$180.70) per ton, 600 yuan (US$72.30) lower than rice in major grain producers in China, indicated statistics of the Ministry of Agriculture.

If the domestic prices continue to shoot up, many grain processors will turn to overseas markets, said Cheng Guoqiang, another researcher with the State Council Development Research Center.

(China Daily November 5, 2003)

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