China Food Prices: Still on the Rise 11/22/2010

China Food Prices- Farmers Market in BeijingThis morning, an article out of the Sydney Morning Herald in Australia reports on the climbing food prices that continue to be seen in China. Farmers Markets throughout China have seen a spike in prices this year.

Some say the rise in feed and seed costs are responsible, starting a chain reaction: farmers must charge the suppliers more for the raw commodities,  who then turn around and truck it to the markets on trucks fueled with highly priced diesel, who pass on their costs on to the merchants, who then pass it on to the customers.

This food price inflation can be seen across the board, from the cost of a dozen eggs , that has risen almost 50% since the summer months, to the price of leeks that has doubled in the past year, according to one shopkeeper in Beijing. The annual food-price inflation hit 10.1% in October compared to 2009.

Causes? Economists worry that the economy is now starting to overheat as a result of the two year stimulus and the excess money floating through the economy.

Last week Premier Wen Jiabao announced food price controls on certain commodities including cotton, grain, oil and sugar and has introduced subsidies to some low-income families. Although some analysts believe these actions are designed to be symbolic, as a way to reassure the poor, they do reflect the government’s efforts to combat inflation.

The question looming in many boardrooms this month is what the impact these price increases will have on importer’s supply chains.  With China exporting billions of dollars a year of food products to companies in the United States, these increases could present an interesting challenge to this industry as a whole.  I’d be very interested in hearing what food importers are seeing out there and welcome any additional insight….

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Picture Source: AFP

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