LIKE many other urbanites, Zhang Jing rarely worried about buying grain products. It seemed to him they were always abundant in the market and always available at a low price.

Yet the situation has recently become a little different. A week ago, when he ordered lunch from his local set meal shop, he was told that he couldn't get the usual discount as the prices for both the rice and cooking oil had risen.

The price lift is not restricted to rice and oil. A couple of days ago, when he brought some soybean milk from street-side stand, he found the price had also risen, up from 1.5 yuan per cup to 2 yuan.

Although the increases are not that large when compared to local incomes, they have been substantial enough to cause anxieties in the city, since such obvious price rises covering so many different kinds of grain products have been unheard of over the past six years.

The price increases are not limited just to Shanghai. A similar situation has arisen in many other cities throughout the country.

It is reported that since mid-October, the wheat prices of all the country's main production areas have seen price rises of some kind. The margin is between 40-80 yuan (US$4.80-9.60) per ton.

At the same time, the corn price has increased from around 80-120 yuan per ton.

"In Shanghai, the price rises started with cooking oil, around October 13," said Tang Weiquan, from the grain products division of the Shanghai Central Wholesale Market of Farm Products.

"The oil price climbed from 6.2 yuan per kilogram to 8 yuan. Immediately afterwards, the price for rice and wheat also rose slightly, by 0.2-0.3 yuan per kilogram."

As October is the time for newly harvested rice to arrive in the market, a temporary price rise is quite usual. As more rice reaches the market, the price gradually falls back to a normal level. But this year, no price decrease has been seen so far.

The higher grain prices have also influenced the cost of meat. Due to the higher cost of animal feed, the price of pork, poultry and eggs has also increased.

Panic buying of cooking oil has even been seen in some stores. There was news recently that a store of the Hualian Supermarket chain, which was selling cooking oil at a slightly lower price than other retailers, attracted so many customers that they even broke the shop's window.

Long-range change

According to Tang, such consumer panic is unnecessary.

"The price rise was determined by the market," Tang explained. "Large-scale shortfalls of both domestic and international grain production this year caused the increase."

The reluctance of farmers to sell rice when the price is climbing, combined with consumer stockpiling of staple foods, has accentuated the imbalance between the supply and demand, worsening the situation.

Yet in the eyes of some other experts, the current price hikes may not be a temporary situation. It may instead prove to be a turning point in the domestic grain market.

For more than five years, the prices of grain products has remained low in China. Following the business cycle, after five years of low prices, the market could see higher prices over the next five. The current reduction in grain produce may well be the trigger flipping the system into the new mode.

Statistics show that this year the country's grain production fell by 3 per cent, the sixth successive year of production decline. For three years, the government has needed to withdraw millions of tons of grain from its stockpiles to fill the gap between supply and demand in the market.

At the same time, the country's total population is still increasing. The deepening of the urbanization campaign has turned millions of farmers into urbanites.

"The grain market is like a pot of water. It is boiling now," said Lan Haitao, an expert from the Macroeconomics Research Academy in Beijing.

Shrinking farmland

Accompanying the price rises, some long-existing agricultural problems have returned to the spotlight.

"One worry lies with the country's large scale reduction of arable land," Lan said.

Statistics from the Agricultural Ministry showed that overall arable land has decreased from an original 1.5 billion mu (100 million hectares) to 1.4 billion mu (93 million hectares).

"A lot of the land was taken up by development zones to attract investment," Lan said. "But much of the ground is just left there, abandoned - nothing is put up until years later."

Fragile infrastructure and a lack of science and technology also puts domestic agriculture at risk when natural disasters strike. The floods and prolonged hot weather this year made major contributions to the decline in grain production.

Farmers' enthusiasm for growing grains has also weakened in the past few years, with the lifting of government regulations requiring SOEs engaged in grain circulation to purchase the grain from farmers at a fixed price.

Government moves towards a free market in agricultural produce has resulted in lower prices, severely impacting upon the incentives of farmers.

"The relationship between supply and demand has changed, so the price rise may well be inevitable," Lan said.

"I would rather call the current price increase a recovery of their value from chronically low levels," he said, adding that this perception was widely shared by business insiders.

To many Chinese farmers, who are still using very rudimentary agricultural techniques, profits have been meager.

The current price surge has given gloomy Chinese farmers a glimpse of brighter prospects for accelerating their sluggish income growth. Research has found that it will take two decades for the per capita income level of farmers to match that enjoyed by urban dwellers in 2000.

Yet it is also possible for some vendors to drive up grain prices by taking advantage of the uncertainties and worries of consumers. To avoid such speculation, the municipal government has set up several inspection spots in the city's main markets. And certain measures have been taken, such as introducing more grain from government stocks into the market and cracking down on illegal hoarding and cornering, to hold down retail prices.