Changes on the Demand Side of Agriculture During the Transition Period: Price Fluctuations of Bulk Commodities Widen
China Securities Network News (Trainee Reporter Jin Jiajie) This year's across-the-board decline in the prices of the three major staple grains has triggered market concerns about agriculture, and the agricultural market during China's economic transition period has also shown new risk characteristics. At the Fourth Risk Management and Agricultural Development Forum held on the 7th, Zhang Hecheng, Director of the Market and Economic Information Department of the Ministry of Agriculture, pointed out that during the period of transformation in the economic development model, profound changes have taken place in the total demand for agricultural products and the consumption structure, and that agricultural market risks in the new period have shown new characteristics such as widened price fluctuations of bulk commodities. It is necessary to strengthen the agricultural risk-resistance system through means such as building a safety net for farmers' incomes, improving the government's regulatory toolbox, and accelerating e-commerce development to improve the circulation efficiency of agricultural products.
Now that China's economic growth is slowing, profound changes are taking place on the demand side of agriculture. Zhang Hecheng pointed out that demand for staple foods with relatively low elasticity has remained relatively stable, but the growth in consumption of higher-value meat, eggs, milk, and aquatic products has declined, and processing demand for corn, cotton, and other products with longer industrial chains has clearly shrunk. In 2014, the growth rate of pork consumption fell back by 1.5 percentage points. It is estimated that from January to October this year, corn consumption demand will decrease by 16 billion jin.
The market-oriented reform of the agricultural product pricing system has also brought certain pains. Because all parties in the market, especially producers, have already formed expectations of a “policy market,” at a time when subsidy mechanisms and market-oriented risk prevention and control systems have not yet been established, the risk of market fluctuations in the initial stage of reform may even be amplified, causing farmers to bear relatively more costs.
At the same time, China's agricultural information and market service systems cannot meet the needs of modern agricultural development. “Our current market information still cannot meet farmers' needs for business decision-making. How much product there is, whether prices are rising or falling, and whether sales prices mean a loss or a profit - if these three figures could be obtained in time, our farmers' production and business decisions would no longer be blind.”
Against this background, risks in China's agricultural product market have shown new characteristics. The first is that the fluctuation range of bulk commodities has widened somewhat. Zhang Hecheng said that for many years in the past, because wheat, rice, and corn were basically supported by minimum purchase prices and temporary storage policies, price changes were not large, but now problems have appeared in bulk commodities as prices return to normal, and this year's cliff-like drop in wheat prices and the adjustment of corn storage purchase prices are both worthy of attention.
Second, the influence of external factors on agriculture and the transmission effects of international markets are both becoming stronger and stronger. Products such as cotton, oil, and sugar are relatively highly dependent on imports, and their prices are very clearly affected by international markets. International oil prices have a profound impact on bulk grain commodities, especially corn varieties.
The third aspect is that the difficulty of ensuring stable farmer benefits and balancing domestic supply and demand has increased somewhat. After this year's reduction in the temporary storage price of corn, the returns of new types of business entities will shrink sharply or even turn into losses, and farmers in Northeast China will see income reduced by about 20 billion yuan. Falling grain prices will dampen farmers' enthusiasm for planting, which means that the cycle of grain price fluctuations is getting closer and closer.
In response to the new risks in the agricultural market, Zhang Hecheng emphasized that bottom-line thinking should be adhered to and three bottom lines should be safeguarded: farmers' incomes in major production areas should remain basically stable; grain should be basically self-sufficient and staple food supply should be absolutely secure; and the agricultural industry should be secure. Next is to strengthen risk-resistance capacity. Ensure production capacity, raise labor productivity, and achieve cost reduction and efficiency improvement in agriculture; optimize the agricultural structure guided by the demand arising from higher resident consumption levels and upgrading of the consumption structure; accelerate the construction of e-commerce platforms and improve the circulation efficiency of agricultural products.
He pointed out that current agricultural product prices suffer from many problems, such as sharp rises and falls, farmers selling cheap while ordinary people buy dear, and price inversion. It is precisely because the circulation links for agricultural products are long and circulation costs are high that these unreasonable phenomena arise. Therefore, improving circulation efficiency is one of the important channels for preventing agricultural risks.
At the same time, the state should also establish an agricultural risk prevention system: build a safety net for farmers' incomes; improve the government's regulatory toolbox, including continuously enriching methods such as price policy, credit policy, and futures policy; and accelerate the establishment of a global agricultural data survey and analysis system and a monitoring and early-warning system suited to the operation of China's agricultural product market.