Sharp rise in prices of agricultural necessities

China's skyrocketing prices of agricultural necessities will cut agribusiness margins and increase inflationary pressures, analysts warned Thursday as prices of seeds, fertilizer and diesel oil all saw double-digit jumps in the first quarter.

"Rising agricultural material prices are mainly caused by surging oil prices and speculative trade in the market," Hu Dinghuan, a researcher with the Institute of Agricultural Economics and Development under the Chinese Academy of Agricultural Sciences, told the Global Times Thursday.

Ma Wenfeng, an analyst with consulting firm Beijing Orient Agribusiness Consultant Ltd, said the price hikes will increase costs and curb incentives for agricultural production.

"The sector will see growing profit declines, which may increase food prices, including eggs and dairy products," Ma told the Global Times Thursday.

China's seed prices went up by 0.5 percent week-on-week and fertilizer prices rose 0.1 percent week-on-week from March 26 to April 2, according to figures released by the Ministry of Commerce Thursday.

In March, corn and cotton seed prices rose by up to 15 percent year-on-year, while prices of major fertilizers, such as chlorpyrifos and compound fertilizer, climbed more than 10 percent, according to figures provided by the Ministry of Agriculture (MOA).

Meanwhile, the average prices of the necessities in February climbed by up to 30 percent year-on-year in Anhui and Sichuan provinces, two of the country's key agriculture areas, according to an investigation conducted by the MOA between February 12 and March 10.

However, the consumer price index is expected to rise by just 3.4 percent in March, the Xinhua News Agency reported Thursday.

The country's inflation grew at its slowest pace in 20 months in February, giving the National Development and Reform Commission confidence to raise diesel prices on March 20.

"The price increases began more than one year ago, stemming from rapid consolidation in the seed industry," said Shi Liang, an analyst with Beijing-based CITIC Securities.