Why do agricultural product prices fluctuate so dramatically?

　　Over the years, media outlets have frequently reacted with alarm to price fluctuations in agricultural markets, even coining a string of "quirky" new terms in the process. Examples include "Garlic Is Ruthless," "Soybeans Are for Fun," "Ginger Army," "Onion Shockwave," and "Sugar Emperor"—all of which share one thing in common: they highlight concerns about soaring prices. Meanwhile, there are remarkably few "unusual" words used to describe falling prices—perhaps only "Dropping Steadily." This could be because journalists, as urban consumers, tend to feel and respond more acutely—and perhaps even more viscerally—to rising costs than to declining ones.

　　Overreacting to price fluctuations in agricultural markets can stem from various reasons. But at the core of it lies a fundamental lack of understanding about the unique characteristics of agricultural supply and demand. Given these traits, significant price swings in certain agricultural products are actually normal—and unfortunately, largely unavoidable.

　　For example, products like scallions, ginger, and garlic are classified as ingredients or condiments within the vegetable category. Compared to regular vegetables, their demand is much lower and exhibits very little price elasticity. When prices drop, households and restaurants don’t significantly increase their purchases; similarly, when prices rise, they don’t cut back much either. This is because scallions, ginger, and garlic play an indispensable role in enhancing the flavor of certain dishes—and are difficult to replace—while their small usage means they contribute only a tiny fraction to the overall cost of vegetables. Similarly, the demand for staple grains also shows very low elasticity. This is primarily because grains are essential as a daily dietary staple, making them virtually irreplaceable. Moreover, the amount spent on grains typically represents a relatively small portion of total food expenditures when compared to items like meat, poultry, eggs, dairy, and fruits and vegetables.

　　Low demand elasticity is the underlying reason behind soaring prices. When demand is inelastic, even a tiny change in supply can lead to significant price fluctuations. For instance, when the supply of scallions, ginger, and garlic decreases, consumers are reluctant to cut back on their purchases—resulting in higher prices. And once prices rise, people still aren’t willing to buy less, so prices continue to climb—until someone finally decides to reduce their buying, or everyone starts cutting back gradually to save a bit. In fact, a 10% drop in the supply of scallions, ginger, and garlic is enough to push prices up by 50% or more—a conservative estimate. Take pork as an example: We have concrete data showing this phenomenon clearly—just like the dramatic spike in pork prices that occurred a decade ago. At that time, pork supplies fell by about 8%, yet prices surged by more than 60%. Given that the elasticity of demand for scallions, ginger, and garlic is likely even lower than that of pork, a similar percentage reduction in supply could trigger an even sharper price increase.

　　A 10% reduction in the yield of scallions, ginger, and garlic is surprisingly common. The reason is simple: abnormal weather patterns—such as prolonged rainfall combined with cooler temperatures—or outbreaks of pests and diseases can easily lead to yield fluctuations of 10% or even more. Meanwhile, a 50% surge in prices often serves as a strong incentive for farmers to expand their planting areas. As a result, even farmers who previously didn’t grow these crops may start switching to scallions, ginger, and garlic. In China, where small-scale household farming dominates, herd behavior and market-driven reactions are widespread. Consequently, by the end of the next production cycle, the supply of scallions, ginger, and garlic on the market may not have increased by just 10%, but could instead jump by 20%, 30%, or even higher. Naturally, this would drive prices sharply downward. But here’s the twist: even if prices drop by 50%, consumer demand for these commodities wouldn’t necessarily rise significantly. On top of that, scallions, ginger, and garlic aren’t exactly easy to store long-term. Farmers, eager to sell their products quickly, would likely engage in fierce price competition, leading to a dramatic collapse in prices—so much so that some of the harvest might simply rot unsold. And then, of course, the cycle begins anew: supply shrinks, prices soar; supply swells, prices plummet. I’ll never forget my grandfather, who lived deep in the mountains before I went to college. He grew his own garlic and brought it to the local market to sell—it turned out to be a great year for prices. Overjoyed, I urged him, “Grandpa, why don’t you plant even more next year?” But to my surprise, he replied, “No way—I’m not growing any more next year. There’ll be too many others doing it, and prices will surely fall.” Though my grandfather’s understanding of economics was limited to recognizing the value of Chinese currency, he inadvertently taught me the very first lesson about the volatile nature of agricultural commodity markets.

　　The cyclical fluctuations in the pork market provide another prominent example. When prices rise, producers respond by increasing output through two main methods: First, they breed existing adult sows, allowing them to carry piglets through gestation before raising those piglets into market-ready fattened pigs— a process that takes nearly a year from start to finish. Alternatively, farmers may expand their herd by introducing more breeding gilts, which, once mature, are then bred to produce piglets that eventually grow into marketable hogs—another approach that typically spans about 18 months. By the time these newly increased numbers of fattened pigs reach the market, supply surges dramatically, causing prices to begin falling. At this point, farmers often respond by scaling back production, starting with reducing their herds of breeding sows. This entire cycle of supply and demand typically unfolds over roughly three years.

　　Due to factors such as low demand elasticity, volatile supply, difficulty in storing products, and biological cyclical patterns—characteristics that are inherent to agricultural commodities rather than isolated occurrences—the price fluctuations of agricultural products have become a common phenomenon.

　　The key characteristics of the changes in agricultural product prices can be summarized in two points: first, their cyclical nature; and second, their amplifying effect. The amplifying feature is particularly significant. When it comes to reflecting supply-and-demand dynamics, price movements serve as a clear signal—rising prices indicate scarcity, while falling prices suggest an abundance. This is common knowledge for everyone. However, it’s crucial to note that this price signal tends to be amplified or even exaggerated. In other words, a sharp increase in prices doesn’t necessarily mean the shortage is exceptionally severe, and a substantial drop in prices doesn’t automatically imply that the surplus is particularly pronounced. This phenomenon stems from the inherent characteristic of low demand-price elasticity: even minor shifts in quantity can trigger significant price fluctuations. As a result, the magnitude of price changes often outpaces—or may even exceed—the scale of quantity adjustments by several times, or sometimes even by a factor of ten or more.

　　These two characteristics of agricultural product market price changes—cyclical nature and the amplification of price signals—are profoundly significant. The media should avoid overreacting, especially by continuing to invent bizarre new terms that only "stoke the flames." Meanwhile, the government must resist misinterpreting these trends, preventing itself from either panicking or falling into blind optimism by chasing after short-term market fluctuations—whether by "adding unnecessary flair" or "pouring fuel onto the fire." Instead, policymakers should focus on long-term, stabilizing measures. For their part, producers and businesses must steer clear of flawed judgments and avoid passively following market trends with reckless adjustments. Instead, they should proactively embrace and adapt to underlying market dynamics, relying on informed forecasts to guide sound decision-making. If these principles are followed, price volatility can be moderated—or even stabilized altogether. Otherwise, market instability will only intensify, ultimately exacting a heavy real-world cost—not just for businesses, but also for governments themselves.