A report conducted by the Ministry of Agriculture said that although farm product prices continue to grow, it won't "surge" as nationwide demand is still far less than supply. The report was delivered to the State Council.

A trial farm product price surveillance system is in operation in some provinces, reflecting simultaneous price changes.

Han Yijun, an expert from the Market and Trade Office of the Rural Economy Research Center of the Ministry of Agriculture, said, "We discovered that demand for most farm products was still less than supply, which means abrupt price surges are only short-term phenomena." Wang Xueqing, a price expert from the State Development and Reform Commission, expressed similar ideas.

After the weeklong National Day Holiday of 2003, the prices of grain and oil rose, which triggered that of other farm products. Until the middle of October, the price of edible oil reached its peak in recent years in Jiangsu, Shangdong, Henan, Anhui, Zhejiang and Hubei provinces.

Han Yijun also stated the slow and backward price surveillance systems of some provinces were facing challenges from shrewd businessmen who acted as agents manipulating farm product prices in circulation processes.   

However, it is certain that prices will continue to grow in the long term for other reasons.

Since China entered the WTO, the prices of grain and oil have dropped sharply. Compared with 1996, the price of wheat dropped 43 percent, rice 42 percent, and cotton 68 percent. This year, the price of cotton rose to 450 yuan a dan (50 kilogram), but still less than 1998, which was 700 to 800 yuan a dan, Wang Xueqing said.

China has an annual population increase of 13 million. Supposing the average consumption of grain remains static, in order to maintain the supply and demand balance, the farm product manufacture must keep a 1 percent growth rate.

At the same time, foreign farm product exporters have down played their expectations in the Chinese market. After the WTO entry, China had a surplus in international wheat and cotton trade.

According to WTO regulations, export allowance should be paid to farmers, not farm products. Since farmers don't export their products to be sold at prices lower than cost, the international farm product prices will see a slow increase, which may affect domestic prices.

Wang Jimin, a researcher with the Institute of Agricultural Economics of the Chinese Academy of Agricultural Sciences, said that the demand and supply of grain are affected by the overall national economy. In 1994, China had a 10 percent growth in GDP, with only a 2 percent growth in grain. The gap between the two growth rates may lead to a higher demand for grain, which is destined to increase the price. On top of that, the booming economy will shrink farmland, and create more grain consuming opportunities at the same time.

A prediction report conducted by the College of Economic Management of Northwest Sci-Tech University of Agriculture and Forestry supports Wang Jimin's opinion, stating that in 2004, China will see a five-percent price increase for products like corn, wheat, rice, soybean, livestock and oil.

(China.org.cn by Li Liangdu and Daragh Moller, November 20, 2003)