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Why do agricultural prices fluctuate wildly?

Industry News
2017/10/26 10:03

  These years, the market price fluctuations in agricultural products, the media often issued exclamations, and created a bunch of "strange" new words. For example, "garlic you ruthless", "Beans You Play", "Ginger Your Army", "Onion hit wave", "Sugar high zong" and so on. All of these expressions have one thing in common: exclaim at the price rise. And the "weird" new words used for falling prices are few, as if a "fall and fall". Perhaps because the media people are urban consumers, the feeling of rising prices is more direct and more sensitive.

  There may be a variety of reasons for the fuss over the price fluctuations of agricultural products. But the most fundamental, should be not understand the characteristics of agricultural demand and supply. According to these characteristics, the large fluctuation of some agricultural products prices is normal phenomenon, it is difficult to avoid.

  For example, the onion ginger garlic products, belong to the vegetable ingredients or accessories, compared with the general vegetables, the demand quantity is very little, the demand elasticity is very small. When prices are lower, households and restaurants will not buy more, and when prices rise, they will not buy less. This is because, the seasoning effect of shallot and ginger garlic is indispensable to some dishes, also is not good to replace, at the same time, the amount of the total cost of vegetables is small. The demand elasticity of grain is also very small, the reason is as the staple food, is indispensable, is difficult to replace, the money that spends, compare with poultry egg milk and vegetable fruit, also very few.

  The demand elasticity is small, is the price soaring the foundation reason. Small demand elasticity, which means a small change in supply quantity, will cause a big price change. For example, when the supply of onion ginger garlic decreased, we do not want to buy less, so the price rose, or no one wants to buy less, the price continues to rise ... It will save a bit until someone reduces the number of purchases, or if everyone reduces the number of purchases. The supply of onions and ginger garlic is reduced by 10%, enough to pull prices up 50% or more. This is a conservative estimate. In the case of pork, there is real data, which is widely felt, and this is what happened 10 years ago when the price of pork soared. At that time, the supply of pork decreased by about 8%, while pork prices rose more than 60%. The elastic coefficient of ginger and garlic should be smaller than that of pork, and the same amount of the same proportion will cause higher price increase.

  onion and ginger garlic production decreased by 10%, is very easy to happen. The reason is very simple, the abnormal weather changes, including the rain and low temperature, or pest impact, can easily lead to 10% or more significant changes in production. and 50% of the price rise, enough to greatly stimulate farmers to increase the acreage, and even many of the original onion ginger garlic farmers, also began to turn to the onion ginger garlic. Our country takes small-scale peasant household economy as the main, herd and follow the market reaction behavior, very common. As a result, at the end of the next production cycle, the supply of onion and ginger garlic in the market is not growing 10%, and may be 20%, 30% or more. As a result, prices are bound to fall. But even if the decline of 50%, onion ginger garlic consumption demand will not increase a lot, not very good storage, producers want to sell, so, had to race to reduce prices, the price will fall very miserable; Finally, some products, may have to let it rot off. Then, start a new cycle: decrease in quantity, price rise, quantity increase, price drop ... I remember before I went to college, living in the deep ravine grandpa, I planted garlic to the market to sell, that year the price is very good. I'm happy to say, Grandpa, a little more next year. Behold, Grandpa said, next year is not planted! The next year will be a lot of people, the price. The cultural level of the old people is only enough to understand the value of the renminbi, but has taught me the first lesson in the theory of price fluctuation of agricultural products.

  The cycle of volatility in the pork market is another prominent case. When prices rise, producers increase production in two ways: to breed existing adult sows, and then, after a pregnancy, give birth to a piglet and then form a fat pig and sell it. It takes nearly one year before and after, and the second is to increase the sow, sow mature, and then breeding, piglets, raise pigs, around 1.5 time. By the time the pigs were raised, the supply of pork in the market increased and prices began to fall; that would lead to farmers reducing their feeding, starting with the reduction of sows ... A complete wave cycle, about three years.

  Because the demand elasticity is small, the supply quantity is changeable, the product storage is difficult, the biological periodicity and so on, is the general characteristic of the agricultural product, is not the accidental phenomenon, therefore, the agricultural product market price fluctuation, is also common.

  The characteristics of the above agricultural price changes can be summarized as two points: first, periodicity, second, amplification. Amplification is a very important feature. In reflecting the supply-demand relationship, price change is a signal: when prices rise, said the shortage, on the contrary, the excess. This is the common sense that people know. However, it is important to note that this price signal is amplified or exaggerated. Namely: The high price rise does not mean that the shortage is particularly serious; the price is much lower, nor does it mean that the excess is particularly prominent. The intrinsic meaning of the small demand price elasticity is that a small quantity change can cause a larger price change, and the magnitude of the price change is several times or more than the quantity changes, or the magnitude of the change is just one or more than 10 cents of the price change range.

  The two characteristics of the price change of agricultural products-periodicity and price signal amplification are very important. Media don't overreact, in particular, not to recreate strange new words, to "stir up the Flames", the government can not do wrong interpretation, such as panic or blind optimism, with the short-term fluctuations in the market after "icing on the cake" or "fuel", but to focus on long-term stability measures; producers and businesses cannot have false judgments, Can not follow the passive blindly adjust, but to actively understand and adapt to the law, with scientific expectations, to guide scientific decision-making. If we can do this, price fluctuations will be eased and even smooth. Otherwise, will aggravate the price fluctuation, must pay the price which the real gold and silver, including the enterprise, also includes the government.