The weakening impact of grain price changes on CPI will become the new normal
In August 2015, the overall level of the national consumer price index rose 2.0% year on year. Among this, urban areas rose 2.0%, rural areas rose 1.8%; food prices rose 3.7%, non-food prices rose 1.1%; consumer goods prices rose 1.8%, service prices rose 2.2%. Grain prices rose
In August 2015, the overall level of the national consumer price index rose 2.0% year on year. Among this, urban areas rose 2.0%, rural areas rose 1.8%; food prices rose 3.7%, non-food prices rose 1.1%; consumer goods prices rose 1.8%, service prices rose 2.2%. Grain prices rose 1.7%, driving the overall level of the consumer price index up by about 0.05 percentage points.
In August, food prices rose 3.7% year on year, driving the overall level of the consumer price index up by about 1.23 percentage points. Among this, fresh vegetable prices rose 15.9%, driving the overall level of the consumer price index up by about 0.46 percentage points; meat, poultry and their products prices rose 9.3%, driving the overall level of the consumer price index up by about 0.69 percentage points (pork prices rose 19.6%, driving the overall level of the consumer price index up by about 0.59 percentage points); aquatic product prices rose 2.4%, driving the overall level of the consumer price index up by about 0.06 percentage points; fresh fruit prices fell 8.1%, driving the overall level of the consumer price index down by about 0.18 percentage points; egg prices fell 11.2%, driving the overall level of the consumer price index down by about 0.11 percentage points.
Shang Qiangmin, director of the National Grain Information Center, once published an article in the magazine China Grain Economy, saying that, first, the impact of grain price changes on CPI has weakened; for example, in December 2014 the rise in egg prices drove the overall level of the consumer price index up by about 0.12 percentage points, 1.3 times the impact of grain prices, a small egg surpassing steamed buns plus rice. Second, in 2015 the situation of grain supply exceeding demand will become more obvious, the driving force for grain price increases will weaken, and it may even pull CPI down. Third, the supply-demand relationship for international agricultural products has improved, prices have fallen, international crude oil prices have plummeted, the US dollar is expected to continue strengthening, and the pressure of grain imports will persist, making the internal and external environment for achieving domestic grain supply-demand balance complex.
I completely agree with Shang Qiangmin's views. Around the Spring Festival or before the new harvest, under normal conditions, grain prices generally rise slightly; on the contrary, the domestic economic downturn, together with the superposition of high grain inventories, high output and high procurement volumes, the “three highs”, was the “blender” of grain procurement, storage and prices in 2015. The contradiction between increasing grain farmers' incomes and the difficulty of absorbing the costs of higher grain prices, the contradiction between grain market support or temporary storage procurement and the growing fiscal burden, the contradiction between using international resources to import grain and the shock to domestic grain production-demand and supply-demand balance, the contradiction between Sinograin being the sole main body for market-support procurement and local grain enterprises' procurement and storage, and the conflict between the conventional view that grain prices are the foundation of all prices and their movement against CPI are all reference factors the industry needs to reunderstand regarding the new domestic grain cycle, and are even more so the essential elements for prudently adjusting and improving the new grain procurement and storage policy.
The assertion that grain prices are the foundation of all prices should now be called into question, and there are two pieces of evidence to support this. Over the past 5 years, labor wages have risen severalfold and logistics costs have also doubled; in fact, the rise in grain prices has been pitifully small. Some data show that since 2006 grain prices have risen by more than 60%, which in fact is not a high margin; compared with vegetables, meat, poultry and eggs, and real estate prices, it is simply dwarfed.
Figures show that although the state has repeatedly raised the minimum purchase price levels for wheat, corn and rice, in 2007 the average minimum purchase prices for wheat, corn and rice were only 80% of the price level 10 years earlier. In 1997 the domestic prices of wheat and rice had already reached the level of 2000 yuan/ton, and only in the past two years have the three major grain varieties of wheat, rice and corn exceeded the price level of 15 years earlier.
What is even more baffling is that as soon as there is the slightest rumor about grain prices, panic psychology takes over and criticism immediately follows. In fact, a jin of wheat is not worth the value or output efficiency of a bottle of mineral water, and grain farmers do not obtain 1/3 of the value-added portion of agricultural products.
Blaming rising CPI on grain prices and other agricultural products is unfair; at the very least there are problems in the design of indicator weights, and it is also unjust or rather prejudiced toward agricultural grain production. In today's accelerating urbanization, there can no longer be “exploitation” of grain farmers; the era of agriculture feeding industry is gone forever, and agriculture must be protected, reciprocated and compensated.
Medical care, education or housing prices are the price-rising group that people can see with their own eyes; how could they not be the main causes of inflation? Can grain at more than one yuan per jin compare with soaring preschool education or elderly care fees? In China grain prices are not too high, but too low. Grain created an era of low prices, and with the rise in land, water resources, oil, agricultural inputs or labor costs, the era of low prices has ended.
Teacher Zheng Fengtian said that agricultural product prices are not the culprit of inflation. The excessively high proportion of food categories in CPI often also becomes an important reason for grain prices being excessively suppressed, and over time this is extremely harmful to farmers who produce grain. At present, the comparative benefit of grain production in China is too low; a farmer's monthly income from farming at home still cannot catch up with a week's income from working away from home. In recent years, migrant workers' wages have risen substantially, further affecting the enthusiasm for growing grain of farmers who stay at home to farm, and in some areas phenomena such as “lazy farming” and abandoned land have already appeared.
In August, food prices rose 3.7% year on year, driving the overall level of the consumer price index up by about 1.23 percentage points. Among this, fresh vegetable prices rose 15.9%, driving the overall level of the consumer price index up by about 0.46 percentage points; meat, poultry and their products prices rose 9.3%, driving the overall level of the consumer price index up by about 0.69 percentage points (pork prices rose 19.6%, driving the overall level of the consumer price index up by about 0.59 percentage points); aquatic product prices rose 2.4%, driving the overall level of the consumer price index up by about 0.06 percentage points; fresh fruit prices fell 8.1%, driving the overall level of the consumer price index down by about 0.18 percentage points; egg prices fell 11.2%, driving the overall level of the consumer price index down by about 0.11 percentage points.
Shang Qiangmin, director of the National Grain Information Center, once published an article in the magazine China Grain Economy, saying that, first, the impact of grain price changes on CPI has weakened; for example, in December 2014 the rise in egg prices drove the overall level of the consumer price index up by about 0.12 percentage points, 1.3 times the impact of grain prices, a small egg surpassing steamed buns plus rice. Second, in 2015 the situation of grain supply exceeding demand will become more obvious, the driving force for grain price increases will weaken, and it may even pull CPI down. Third, the supply-demand relationship for international agricultural products has improved, prices have fallen, international crude oil prices have plummeted, the US dollar is expected to continue strengthening, and the pressure of grain imports will persist, making the internal and external environment for achieving domestic grain supply-demand balance complex.
I completely agree with Shang Qiangmin's views. Around the Spring Festival or before the new harvest, under normal conditions, grain prices generally rise slightly; on the contrary, the domestic economic downturn, together with the superposition of high grain inventories, high output and high procurement volumes, the “three highs”, was the “blender” of grain procurement, storage and prices in 2015. The contradiction between increasing grain farmers' incomes and the difficulty of absorbing the costs of higher grain prices, the contradiction between grain market support or temporary storage procurement and the growing fiscal burden, the contradiction between using international resources to import grain and the shock to domestic grain production-demand and supply-demand balance, the contradiction between Sinograin being the sole main body for market-support procurement and local grain enterprises' procurement and storage, and the conflict between the conventional view that grain prices are the foundation of all prices and their movement against CPI are all reference factors the industry needs to reunderstand regarding the new domestic grain cycle, and are even more so the essential elements for prudently adjusting and improving the new grain procurement and storage policy.
The assertion that grain prices are the foundation of all prices should now be called into question, and there are two pieces of evidence to support this. Over the past 5 years, labor wages have risen severalfold and logistics costs have also doubled; in fact, the rise in grain prices has been pitifully small. Some data show that since 2006 grain prices have risen by more than 60%, which in fact is not a high margin; compared with vegetables, meat, poultry and eggs, and real estate prices, it is simply dwarfed.
Figures show that although the state has repeatedly raised the minimum purchase price levels for wheat, corn and rice, in 2007 the average minimum purchase prices for wheat, corn and rice were only 80% of the price level 10 years earlier. In 1997 the domestic prices of wheat and rice had already reached the level of 2000 yuan/ton, and only in the past two years have the three major grain varieties of wheat, rice and corn exceeded the price level of 15 years earlier.
What is even more baffling is that as soon as there is the slightest rumor about grain prices, panic psychology takes over and criticism immediately follows. In fact, a jin of wheat is not worth the value or output efficiency of a bottle of mineral water, and grain farmers do not obtain 1/3 of the value-added portion of agricultural products.
Blaming rising CPI on grain prices and other agricultural products is unfair; at the very least there are problems in the design of indicator weights, and it is also unjust or rather prejudiced toward agricultural grain production. In today's accelerating urbanization, there can no longer be “exploitation” of grain farmers; the era of agriculture feeding industry is gone forever, and agriculture must be protected, reciprocated and compensated.
Medical care, education or housing prices are the price-rising group that people can see with their own eyes; how could they not be the main causes of inflation? Can grain at more than one yuan per jin compare with soaring preschool education or elderly care fees? In China grain prices are not too high, but too low. Grain created an era of low prices, and with the rise in land, water resources, oil, agricultural inputs or labor costs, the era of low prices has ended.
Teacher Zheng Fengtian said that agricultural product prices are not the culprit of inflation. The excessively high proportion of food categories in CPI often also becomes an important reason for grain prices being excessively suppressed, and over time this is extremely harmful to farmers who produce grain. At present, the comparative benefit of grain production in China is too low; a farmer's monthly income from farming at home still cannot catch up with a week's income from working away from home. In recent years, migrant workers' wages have risen substantially, further affecting the enthusiasm for growing grain of farmers who stay at home to farm, and in some areas phenomena such as “lazy farming” and abandoned land have already appeared.