Surprising reason why grocery prices are up

BEIJING - The booming economy in China has increased the country's appetite for oil - that is well known. But what you might not know is prosperity has also increased China's appetite for another commodity - meat.

The Li Family of Beijing has been serving food fit for a king, since imperial times. Mrs. Li's great-grandfather was a cook in the Forbidden City, home to China's emperors. Today, the tiny family restaurant still serves the palace's food.

"This is what the last Emperor used to eat," Mrs. Li tells CBS News correspondent Celia Hatton.

Now, many in China are rich enough to eat whatever they choose, especially meat. Each Chinese person devours about 111 pounds of meat a year - not as much as Americans' 239 pounds - but they're getting there.

"People here want to enjoy themselves, so they want to taste everything," Li Anyin says. "We never saw bacon when we were kids, but now it's available."

That's no exaggeration. The Li's generation lived through China's epic famine in the 1960s. Thirty million people starved to death when the government turned farms into collectives and ordered many farmers to work in the iron and steel industry.

The Li's daughter can barely believe their stories. "People my age, we're still very young, so whatever we want to eat, we'll eat," Wang Xiyi says.

Name a meat product, and China's new middle class is feasting on it: from juicy steaks and hamburgers to stir-frys and even the Colonel's secret recipe.

But there's a problem. China's approximately the same size as the United States but its land supports four times the population: 1.3 billion people. Year after year of drought has lead to severe water shortages, and that means trouble for a country trying to raise an expanding number of livestock.

Cattle need feed, and a lot of it. Each animal goes through several pounds of corn and soy a day and an increasing amount of that feed comes directly from the U.S.

China used to export soybeans but now it's reversed that trend - snapping up more than half of America's soy exports for the past three years. It'll soon be the same story with corn.

China's hunger is a boon to U.S. farmers.

"I don't think your average consumer realizes how much is going over to China and how important that market is for the U.S. economy," Jim Call says.

Call's family has been growing soybeans on the same 3,000 acres in Madison, Minnesota for five generations. In the past decade, he's seen the price of a bushel of soy almost triple, thanks to his Chinese customers.

"Now we're such a global society that when something happens in China, it directly affects my farm," Call says.

China's move up the global food chain impacts American consumers too: The Department of Agriculture warns grocery prices will rise 4 percent this year. China's demand forces Americans to pay more for products dependent on soy and corn like cereal, vegetable oil, meat and milk.

This year marks the 50th anniversary of the end of China's great famine. The communist leadership's latest plan includes increasing military spending, improving infrastructure and growing the livestock industry from starvation to plenty - within the memory of a single family.

  • Celia Hatton

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