Monday, 20 June 2011

Deadly Floods Drive Up Food Prices in China


BEIJING—Flooding across eastern, southern and southwestern China has killed at least 175 people and is causing significant damage to vegetable crops, adding to upward pressure on food prices at a time when the government is battling to contain inflation.

The flooding, triggered by heavy rains that started early this month, has caused widespread suffering in more than a dozen provinces and regions, with state media calling it the worst in decades in some areas. In addition to the 175 known deaths, 86 people are missing and some 1.6 million people have been displaced by the flooding, which has caused more than $5 billion in damage as of Monday, the Ministry of Civil Affairs said. Official forecasts have predicted further rain in a number of the most-battered provinces.

The flooding has reduced vegetable output by about 20% from levels a year earlier in the worst-hit places, particularly in the eastern province of Zhejiang, and pushed grain and vegetable prices higher, according to state media. Vegetable prices are likely to continue to increase or remain high for about two weeks, the state-run Xinhua news agency on Monday cited Jin Changlin, a Zhejiang agricultural official, as saying.

Carlos Barria/Reuters

A farming area under water Sunday in Banshan village, Zhejiang province

More than 432,000 hectares of crops have been destroyed in flood-affected provinces around the country, including 241,600 hectares in Zhejiang—about an eighth of the province's total.

At one big market in Hangzhou, Zhejiang's capital city, prices of fruits, vegetables and grains have risen about 40% on average, according to Xinhua. It didn't provide its basis of comparison, but it's likely the prices were being compared with those of about a month ago. Higher food prices were also reported in Anhui and Jiangxi provinces, although the size of the increases was unclear.

The flood-related effect on prices for now may be fairly local, but the rising cost of vegetables has already been a leading factor in pushing inflation to near-three-year highs. Food prices in May were up 11.7% from a year earlier, more than twice the 5.5% increase in the overall consumer price index.

China goes through regular cycles of drought and flooding, and both have been relatively severe over the past year. The recent drought was called the worst in 50 years in some parts of China, and continues to affect almost five million hectares of farmland nationwide—including in different areas of some of the same provinces now afflicted by floods.

In last year's fourth quarter, vegetables—along with other agricultural products including cotton, wheat and edible oils—fueled a sharp surge in inflation, with prices of common produce like garlic and ginger doubling from a year earlier.

The National Meteorological Center over the weekend maintained an "orange" rainstorm alert, its second-highest alert level, as Beijing called an emergency flood-control meeting Sunday to discuss flood preparations, Xinhua said.

"Severe floods triggered by heavy rains will continue to threaten southern parts of China and bring the country into a crucial moment for flood control," Minister of Water Resources Chen Lei said on the ministry's website.

The government has maintained that grain prices won't be heavily affected by China's recent weather problems, and officials say China is aiming for an eighth consecutive record annual harvest this year.

But Sheng Laiyun, spokesman for the National Bureau of Statistics, said on Friday that weather "may affect the 'psychological expectations' for higher prices."