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UPDATE 2-China scrambles to ensure food supplies after snow
February 14, 2008 / 3:36 AM / 10 years ago

UPDATE 2-China scrambles to ensure food supplies after snow

(Recasts)

By Zhou Xin and Lindsay Beck

BEIJING, Feb 14 (Reuters) - Chinese authorities are scrambling to ensure food supplies and stem rising inflation as the country digs out after bitter winter storms that damaged crops and left millions in the cold and dark.

Sharp rises in the prices of food in China for more than a year had been driven by grains and meat, as a shortage of pigs caused prices to spike and drove inflation to 4.8 percent in 2007, its highest in 11 years.

But due to crop damage caused by the storms, China is now shifting its attention to ensuring vegetable supplies.

“Agricultural production has been severely affected by the snowstorm and we are faced with the arduous task of restoring production after the disaster,” Zhang Yuxiang, director of market and economic information at the Ministry of Agriculture, told a news conference.

China’s worst winter weather in half a century killed at least 107 and caused direct economic damage estimated at $15.4 billion, as ice and snow storms destroyed homes and caused power outages that left whole cities in the dark for days.

The unusually severe weather also hit just as people were trying to head home for the Lunar New Year holiday, meaning millions were stranded in train and bus stations as transport links ground to a halt.

The cold is widely expected to have helped drive annual inflation above 7 percent in January, after the weather disrupted transport, froze vegetable patches and damaged fruit trees. Food makes up a third of China’s consumer price index.

“Generally speaking, there is no problem with supply. Prices have dropped from the early days of the disaster but, due to transport problems in remote areas, prices of some goods are still high,” said Assistant Commerce Minister Huang Hai.

He said inflationary effects of the storm would last through the first quarter, but declined to predict whether China’s consumer inflation would hit new high in January or February.

“On the whole, the snow will have some impact on China’s food prices, but it will not be dramatic,” Huang said.

The weather had no impact on China’s exports, apart from trade in some agricultural products and delayed shipments, he added.

Animal deaths from the storm -- mostly poultry -- totalled 69 million, the Agriculture Ministry’s Zhang said, but experts said that despite the damage, poultry supply and prices in China’s large cities were likely to be unaffected since the large commercial breeders were not hit by bad weather.

But in rural areas in the south, where small breeders raise 500 to 1,000 chickens at a time in flimsy coops, poultry supply could take months to recover, said James Rice, country manager for U.S. poultry firm Tyson Food (TSN.N).

China has also released more pork from reserves it built to ensure supplies after meat prices soared last summer.

The measures are all aimed at keeping inflation under control in a country where rising prices have been linked to social instability, which the ruling Communist Party is at pains to avoid.

Authorities said they would also work to ensure that subsidies to help those affected rebuild after the storms ended up in the hands of those in need, rather than in the pockets of local officials.

“We will intensify our efforts in fund management and supervision,” said You Mingchun, in the Finance Ministry’s social security department. “We will seriously punish those responsible for holding on to or embezzling the funds.” (Additional reporting by Lucy Hornby; Editing by Nick Macfie and Alex Richardson)

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