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Hot CPI figure may spark further measures to cool grain prices

China's hot November consumer price index figure, which hit an 11-year high of 6.9 percent, might trigger further government control measures to cool rising grain prices, and may be felt first at state grain auctions.

"State grain auctions are definitely the most direct and effective way of cooling domestic grain prices in the short term, as it immediately enriches market supply," a researcher on the agriculture industry from Huatai Securities, who did not want to be named, told Interfax.

State reserves authorities have put nearly 6 million tons of stockpiled wheat up for sale in the past two weeks, and plan to sell another 4.5 million tons this week in an effort to rein in the domestic wheat market. Just today, reserves authorities put 500,000 tons of stockpiled corn on sale for the first time this year, a move that was also aimed at cooling the domestic corn market.

However, in the longer term, simply relying on auctions might not be enough, as grain price growth is also supported by rising costs of agricultural supplies like fertilizers, pesticides, fuel, as well as the rising cost of labor," the researcher added.

Surging food prices contributed heavily to China's November CPI growth, according to the National Bureau of Statistics. In November, grain prices rose 6.6 percent while edible oil products prices soared 35 percent compared with the same month last year. Higher prices for grain and soy meal products, the key raw materials for animal feedstock, are then passed along to the livestock industry, putting inflationary pressure on meat and animal products.

Tags · China · Grain · CPI · Prices

11.12.2007. 01:15

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