When analyzing the recent phenomenon whereby farmers suffered abnormally low purchase prices for their vegetables but urban residents did not see any significant drop in the market prices, experts and government officials all attributed the problem to "the high cost of logistics".
In a forum hosted by the National Development and Reform Commission (NDRC) last week on commodity prices, Wang Tongsan, a research professor of the Chinese Academy of Social Sciences, revealed that: "The cost of logistics make up a whopping 50 to 70 percent (of the final price)." Wu Xiaoqiu, a senior economist and official of the NDRC, said that the price of a farm product "is raised again and again by profit-seeking intermediate traders at different layers before reaching a high at the dinner table".
At a press conference held the following day, Fu Ziying, vice minister of commerce, also mentioned the problem with the "logistics channels" and promised that his ministry will join the Ministry of Agriculture to take moves to "reduce the number of links in the flow of farm products and let farmers get the profits from the end price of farm produce".
Their remarks reminded me of a column I wrote almost two years ago on the same topic, in which I denounced the intermediate traders between the farmers and consumers for grabbing the largest part of the profits generated during the course of commodity flow.
Don't get me wrong. I am not implying how prognostic I was. The point I am trying to make is why the same question has remained unresolved for so long.
In fact, I was not the first to direct the blame at the intermediate traders. Before writing that column in 2009, I looked up official data to back up my assumption about the part the traders played in escalating the prices. I found that in as early as May 2008, the NDRC, the Ministry of Commerce and the Ministry of Agriculture had conducted an investigation into the profit distribution of agricultural products traveling from farm plots to market shelves. The investigation found that "in general, the profits made by the wholesale and retail links are excessively high" and "while farmers suffer from fluctuation in the prices of farm produce, the middle links enjoy relatively stable profit-earning".
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