China Calls For An End To The Accumulation Of Vegetables

Vegetable prices have exploded in China in recent weeks, creating an unthinkable situation a few months ago: some vegetables are already more expensive than meat. Restaurants and stores would be stockpiling large quantities of goods, using freezers and refrigerators. This phenomenon is a new headache for consumers who are already affected by energy shortages and strict measures to contain the virus.

Wholesale vegetable prices have soared 28% in the last four weeks, and are now at the highest level since February, the latest data from the Commerce Ministry shows. Heavy rains in the main producing regions this year have damaged crops, while rising coal prices have also made greenhouse farming more expensive.

Cauliflower, broccoli and spinach
Cauliflower and broccoli cost about 50% more, while spinach increased 157% in the four-week period. At Beijing’s Xinfadi Market, a half-kilo bag of lettuce or spinach cost up to 8 yuan ($ 1.25) on Wednesday. The same amount of pork cost between 8 and 10.5 yuan and chicken between 7 and 10 yuan, according to Bloomberg .

The price hike is so strong that China’s Ministry of Agriculture vowed last week to crack down on the hoarding of vegetables and ensure a stable supply. Many consumers are also complaining on social media, saying that they were shocked by prices and that they can no longer afford to eat vegetables.

However, economists expect the boost to inflation to be temporary, and prices are likely to remain high for a few months until demand begins to ease during the Lunar New Year in February. GF Securities foresees an increase of 0.5 percentage points in consumer prices in October compared to the previous month.

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“We expect the CPI to move towards 2% in the coming months, mainly due to base effects, but also a modest sequential rebound in inflation momentum,” said Zhu Haibin, chief China economist at JPMorgan in Hong Kong. Kong.

Falling pork prices since last year and weak household demand have kept consumer inflation in check this year even as factory prices have soared. Economists surveyed by Bloomberg project an increase of 1.1% in 2021 and 2.2% in 2022.

The Securities Times, a newspaper managed by the official People’s Daily, assures that the increase in the price of vegetables will have a limited impact on consumer inflation. The weight of vegetables in the CPI is low, as revealed in a report citing retailers and analysts from China Minsheng Banking.

Egg Futures
Higher prices for vegetables could become a broader inflation problem , as feed and feed for farm animals is often based on those vegetables. The Chinese government closely monitors the prices of pork, which is a key food in China and a crucial determinant of consumer inflation.

For now, there appears to be a slight impact on protein prices, with Chinese egg futures reaching the highest level since July and live pork prices rising more than 25% this month.

“Coriander now costs 17.8 yuan per pound, it is more expensive than pork!” A consumer in the eastern province of Anhui said on social media, in statements collected by Reuters.

Vegetable accumulation
This situation occurs just as consumer demand is recovering in the ‘Asian giant’, as shown by the recent rebound in the service sector, while stores and restaurants are accumulating supplies before winter. Economists do not expect the central bank to not react to rising inflation, as it is likely to be temporary.

Zhu says the People’s Bank of China will likely keep banks’ reserve requirements and interest rates unchanged for the rest of the year, instead using open market operations and its medium-term credit facilities to keep broad. market liquidity.

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