Investors seek returns in grain speculation: analysts

12:41, July 22, 2010      

Email | Print | Subscribe | Comments | Forum 

Government efforts to curb China's soaring property prices might have fueled speculation in the grain market, driving up wheat prices by as much as 10 percent in a year, say analysts.

Experts are calling on the government to open more avenues for investment while stock markets remain relatively flat and as speculative cash is driven out of the property market.

Speculation on grain products like wheat and mung beans could be a result of poor performances of Chinese equities and government measures to cool the property market, said Wang Jian, an economist with the Chinese Macroeconomic Society.

The slight drop in China's summer grain output could not explain the soaring grain prices, given China had a large grain stockpile, he said.

This summer's grain output was down 0.3 percent from last year's to 123.1 million tons due to drought in southwest China earlier this year.

The summer grain output rose for six consecutive years to top 123.35 million tonnes last year, 2.6 million tonnes more than the previous year.

China, the world's biggest grain consumer, devoured about 500 million tonnes of grain a year, said Bao Kexin, president of China Grain Reserves Corp..

The government maintained a grain stockpile equivalent to about 40 percent of demand to safeguard food supplies and control prices, he said.

By the end of March last year, China's stockpile of grain stood at 225.4 million tonnes, according to State Administration of Grain.

However, wheat prices at the end of June in China's main wheat producing areas, like Anhui and Shandong provinces, had exceeded 2 yuan (30 U.S. cents) per kg, up 10 percent year on year, according to the National Bureau of Statistics (NBS).

At some purchase stations in east China's Jiangsu Province, wheat prices topped 2.08 yuan a kg Wednesday, compared with 1.72 yuan last year, said Li Chunhu, head of the Xingqiao State Grain Storage in Sheyang City.

The price of mung beans soared from 9 yuan per kg in October last year to 20 yuan in May, according to the NBS.

Rising grain prices have ignited concerns about speculation, echoed by recent government findings.

China's National Development and Reform Commission (NDRC), the country's top economic planner, released a recording containing evidence of mung bean price manipulation on Sunday.

The recording of a mung bean traders conference in Jilin, northeast China, in October last year caught representatives calling for the hoarding of beans to raise the price.

Government agencies, including the NDRC, the Ministry of Commerce and the State Administration of Industry and Commerce, announced that a number of companies had received fines ranging from 500,000 yuan to 1 million yuan.

The move would help rein in grain speculation, after money drained out of the property market, said Wang Li, an economist with the Chinese Academy of Social Sciences (CASS).

However, the government could open more channels for investment, like further opening low-carbon industries, to draw speculative cash as China sought energy-efficient and environment-friendly development, she said.

The government's efforts to address excessive growth in property prices had discouraged speculation in the property market, said Wang.

In June, average housing prices in 70 major Chinese cities fell by 0.1 percent from May, according to the National Bureau of Statistics.

The annual growth of property prices in cities slowed for the second month, from 12.8 percent in April to 12.4 percent in May and to 11.4 percent in June.

The Shanghai Composite Index lost 26 percent in the first half of the year on concerns that the government's property market measures would dent economic growth.

Food prices gained 5.5 percent year on year in the first six months. In June alone, food prices rose 5.7 percent year on year, according to the NBS.

Source: Xinhua


  • Do you have anything to say?


Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • Chinese President Hu Jintao watches the launch of Tiangong-1 space lab module at Beijing Aerospace Control Center in Beijing, capital of China, Sept. 29, 2011. Other members of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, including Wu Bangguo, Jia Qinglin, Li Changchun, Xi Jinping, Li Keqiang and Zhou Yongkang, are also present. (Xinhua/Rao Aimin)
  • The graphics shows the launch procedures of the carrier rocket of Tiangong-1 space lab module, Long March-2FT1 on Sept. 29, 2011. (Xinhua/Lu Zhe)
  • Image taken from Beijing Aerospace Control Center shows a Long March-2FT1 carrier rocket loaded with Tiangong-1 unmanned space lab module blasting off from the launch pad at the Jiuquan Satellite Launch Center in northwest China's Gansu Province, Sept. 29, 2011. (Xinhua)
  • On Sept. 28, tourists travel around the Mingshashan Scenic Area in Dunhuang, Gansu province by camel. With the National Day vacation right around the corner, more and more tourists from home and abroad are going to Dunhuang. Riding on a camel, they travel in the desert to enjoy the cities rare form of natural scenery. (Xinhua/Zhang Weixian)
  • Chinese forest armed forces work together with forest firefighters on Sept. 28. (Xinhua/Chai Liren)
  • Photo taken on Sept. 29, 2011 shows strong wind blows trees in Sanya, south China's Hainan Province. Typhoon Nesat heads towards south China and is moving at an average wind speed of 20 km per hour toward the west coast of China's Guangdong Province. (Xinhua/Hou Jiansen)
Hot Forum Discussion