China’s vegetable prices surge as heavy rains hurt major growing regions

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Vegetable prices are surging in China after heavy rains hit major growing regions and soaring energy prices also boosted production costs.

Wholesale vegetable prices surged 28 per cent in the four weeks through until October 22, and is now at the highest level since February, data from the Ministry of Commerce showed.

Cauliflower and broccoli costs about 50 per cent more, while spinach surged 157 per cent in the four-week period. At Beijing’s Xinfadi market, a half-kilogram bag of lettuce or water spinach cost as much as 8 yuan on Wednesday. The same quantity of pork cost about 8 yuan to 10.5 yuan, and chicken was 7 yuan to 10 yuan.

Unusually heavy rains drenched northern swathes of China in September and early this month, flooding the top vegetable-growing province of Shandong. The price of spinach has jumped to 16.67 yuan ($2.61) per kg this week from 6.67 yuan in late September, a price index published in the provincial vegetable trading hub of Shouguang showed. The prices of broccoli, cucumbers, and cabbage have also more than doubled in recent weeks.

Higher energy prices are also pushing up operating costs for greenhouses, in addition to record prices this year for fertiliser. 

“Our natural gas prices are up at least 100 per cent and we think they could triple during Chinese New Year,” said Xu Dan, manager of the HortiPolaris greenhouse in Beijing. Chinese coal prices have gained nearly 190 per cent this year on tight supplies following tough safety checks and graft investigations in key mining regions.

Authorities in the city of Beijing have warned that prices could rise further in the next few weeks, as the city looks further south to source its vegetables when temperatures fall and high energy prices boost transport costs.

“Due to multiple factors, such as cooler weather and rainfall, the prices of some edible agricultural products, especially vegetables, and some means of production, have continued to rise recently,” said commerce ministry spokeswoman Shu Yuting on Thursday.

She said that the ministry was tracking the daily changes in the vegetable, meat, grain and oil markets to strengthen early warnings, and would “release government reserves in a timely manner” to ensure stable supply and prices.

Economists expect the boost to inflation to be temporary though, with prices likely to remain high for a few months until demand eases during the Lunar New Year in February.

GF Securities estimate a 0.5 percentage-point boost to consumer prices in October from the previous month, while JPMorgan Chase & Co. expects the same increase in the year-on-year rate. 

JPMorgan expect the consumer price index to move up towards 2 per cent in the next few months, mainly due to base effects but also modest sequential pickup in inflation momentum.

Falling pork prices from last year and weak household demand have kept consumer inflation subdued this year despite skyrocketing factory-gate prices.

Consumer-price growth slowed to 0.7 per cent in October, with JPMorgan predicting 0.9 per cent for the full year, well below the government’s official target of 3 per cent. Economists surveyed by Bloomberg project a 1.1 per cent rise in 2021 and 2.2 per cent in 2022.

Vegetable price surge will have a limited impact on consumer inflation, as the weighting of vegetables in China’s CPI is low, according to a report from China Minsheng Bank.

Higher vegetable prices could become a broader inflation problem if the gains stoke bullish sentiment in agricultural markets and consumers switch to eating more eggs and pork.

There already appears to be a spillover onto the prices of proteins, with China’s egg futures hitting the highest level since July and live hog prices climbing more than 25 per cent this month.

The La Nina weather pattern expected this winter, which means below-normal temperatures in the northern hemisphere, is driving expectations that production and transport of vegetables will be negatively impacted, GF Securities analyst He Xiaoshu said in a report.