China’s food inflation picks up
In September, China’s food inflation rose to 6.1%, up from 4.7% in August. Price increases were primarily driven by an increase in fresh vegetables and meat. The September data most likely reflects an increase in demand as well as some supply problems.
Higher demand, lower supply
Drought, frost, and flooding were factors that negatively affected food supply this year in China, while the rest of the world saw much more favorable weather, yield, and production. Faster economic growth since China accelerated its spending program to keep its 7.5% growth target for 2013 is driving national income. So demand for food—particularly vegetables and meat that are considered more luxury fare—is rising.
Farmers will use more fertilizers
As the overall CPI, which now stands at 3.1% is within the government target, actions to reduce growth are unlikely. That means demand will keep growing. To meet this demand, farmers will be using more fertilizers, which would support demand for fertilizers like potash, phosphate, and nitrogenous fertilizers.
Higher food prices are positive for stocks
If food prices in China continue to rise, expect China’s demand for fertilizer to increase as well.
