Fluctuations of Prices in the World Grain Market: Policy Responses by the Chinese Government

Abstract

[Extraact] The grain price hikes in the international market during 2007-08 were most astonishing and attracted much attention all around the world. In mid·2007 the prices of wheat and corn started to increase sharply. In early 2008, the price of rice also started to rise steeply. According to the data published by the World Bank, the price of wheat peaked by March 2008 to reach US$440 per tonne. In April 2008, the price of rice reached its climax, at US$907 per tonne, while the price of corn peaked in June, at US$287. Compared to the price level in May 2007, the month before the price hikes started, the peak prices were, respectively, 125 percent, 186 percent and 52 percent higher for wheat, rice and corn. In response, governments in many countries took interventionist measures over the food prices in their domestic markets in order to achieve urgent socioeconomic objectives, such as food security and social stability. However, with the deepening of the global financial crisis, the prices of grains declined sharply in the latter half of the year. By the end of 2008, the prices of wheat, rice and corn fell from their respective peaks by 50 percent, 41 percent and 36 percent (World Bank, 2009).