Food Security: Increased Food Price at Domestic and Foreign Food Markets Should Be Alerted

In the past few days, due to the abnormal climate impacts such as the United States drought, the prices of major international agricultural products continued to rise sharply. Soybean and corn prices were both set to record, and wheat prices also rose in line. In contrast, the current domestic food prices are stable and have limited international influence.

In spite of this, relevant experts pointed out that in the context of global integration, the correlation between international and domestic agricultural product markets has been gradually increasing in recent years, and the international food prices have become increasingly conductive to domestic food prices. New trends have emerged during this period, as well as exposures. The related issues urgently need attention.

The influence of international market grain prices on the Chinese market is gradually deepening

Since June 2012, the United States, the world’s largest agricultural producer and exporter, has suffered rare dry weather for more than 50 years. Due to the expected sharp reduction in the production of corn and soybeans, the international food prices of related species will increase.

Previously, the two domestic and international food price fluctuations from 2006 to 2008 and from 2010 to 2011 were also impressive.

In 2008, international food prices continued their upward trend in previous years and they have risen sharply. According to statistics from the Food and Agriculture Organization of the United Nations (FAO), global food prices rose by 12% and 24% respectively in 2006 and 2007, and rose by more than 50% in the first eight months of 2008. In contrast, the domestic food prices did not change much during the year and the overall market remained stable.

Two years later, in July 2010, the price of wheat on the Chicago Board of Trade in the United States soared 42%, the biggest monthly increase in half a century; wheat prices in the European market rose by nearly 50%, the largest monthly increase in 30 years. In China, the prices of agricultural products represented by wheat, corn and beans fluctuate, and they remain steady and slightly upward.

“In the world grain shortage, China is not alarmed.” Industry insiders pointed out that in terms of food security, as China has always insisted on a self-sufficient stance, coupled with the country’s control measures for food prices, it has played a peak-to-peak effect, making domestic food The price fluctuations are much lower than the international market.

However, from the food price fluctuations in recent years, the correlation between the domestic and foreign grain markets has also increased significantly. Zhu Xianfeng, chief economist of the Price Monitoring Center of the National Development and Reform Commission, said: “Since China’s accession to the WTO, the impact of international food prices on domestic food prices is a fact, and the degree of influence is also increasing. The trend of grain prices at home and abroad is showing a trend. The greater the consistency."

Curve conduction and staple food phenomenon worthy of vigilance

In view of the above-mentioned trajectories of domestic and foreign grain price fluctuations, relevant experts pointed out that apart from highlighting the common trend of increasing domestic and international grain price linkages, the incentives of price fluctuations in each round, international food prices, and domestic food prices Conduction paths and effects are different.

According to Chai Ning, senior researcher of China Grain Network, taking the 2008 “International Food Crisis” as an example, the United States used corn to develop biofuels, and the demand for agricultural products soared, together with natural disasters that caused the output of major grain exporters such as the United States and Australia to decline. The superposition of various factors has led to an increase in global grain prices, but the high price of grain has largely been due to the transmission of high oil prices.

“Comparing with 2008, natural disasters have become the trigger for rising food prices this year, and the follow-up driving force for continued rising food prices will be mainly due to imbalances in food supply and demand caused by disaster weather, and the rapid development of fuel ethanol in the United States, Brazil and other countries. Chai Ning said.

Shi Limin, an analyst at the Zhengzhou Stock Exchange, pointed out that because the global grain supply and demand pattern is increasingly in a subtle, “balance on the blade”, it is easy to amplify supply shortages. The related incentives include overheated economic growth and speculation. Natural disasters, and even temporary policies of a certain grain-exporting country will also trigger a "butterfly effect" that sweeps across the globe.

After the Spring Festival in 2011, affected by the dry weather, the 1109 contract of Zhengmao Amai sharply increased rapidly in the short term. The single-day gain rose by 3,000 points and the highest rose to 3,110 points. The daily trading volume was close to one million hands and the positions were close to 300,000 hands. Almost three times the last trading day before the holiday. However, after a large range of rainfall, strong wheat futures continued to fall.

He Liang, an analyst at Hefei National Grain Wholesale Trading Market, pointed out that this kind of "roller coaster" market is caused by the typical capital's hype.

“Under the backdrop of rising domestic food prices, hot money is expected to churn out a variety of themes and the effect of disturbance on the market is becoming increasingly apparent. The target of speculation has also been expanded from soybeans and corn to staple varieties such as wheat and rice.”

In addition to diversification of incentives, due to the substitution effect among various food varieties, a new situation has emerged in the transmission path of international food prices to domestic food prices.

Dai Shaoqin, deputy director of the Anhui Provincial Grain Bureau, said that after the start of the trust market purchase this year, domestic wheat prices have risen steadily and have little impact on the international market. However, in the long run, due to the inversion of wheat and corn prices, the channel for domestic wheat to replace corn as feed has been opened, and there may be joint price increases among various varieties.

"Data Discourse Rights" Lack of Adverse Food Security

Experts pointed out that with the increasing correlation between grain prices at home and abroad, the transmission and fluctuation of food prices in each round are accompanied by the game and contest of “data discourse power”. However, due to the lack of strength or lack of domestic “data discourse power”, it often brings adverse effects on food regulation and market stability.

Take the “soybean crisis” in 2004 as an example. At that time, the United States Department of Agriculture first lowered and then increased soybean production, causing soybean prices to fluctuate sharply to a sharp drop. The soybean industry in China suffered heavy losses as a result.

Zhu Xianfeng believes that in the long run, the trend of China's grain market is inevitably linked to international standards. Government regulation must also be used as a foundation, and it cannot return to the old path of planned economy.

"To sum up, the conduction of the two markets is nothing more than the entity's import and export and non-entity information and the market confidence and expectations it generates, while the import and export countries have always implemented a quota system, so non-entity information will be transmitted in the next two markets. The key point."

Zhang Zhixian, research and development director of the China Grain Food Information Department, said: “In the international agricultural market, the United States has a strong voice not only because it is the world's leading producer and exporter of agricultural products, but also because it has established a set of enough influence. The data system of international grain prices, in contrast, currently there are many departments in the country that monitor the production and price of agricultural products, but many times are low-level duplicated constructions, and the data are reliable, timely, and open without effective guarantees."

Wei Zhongsheng, chief economist of the Agriculture Department of Henan Province, said that in order to protect China's food security, in addition to insisting on establishing itself and continuing to increase investment in agricultural production, we must also vigorously develop the agricultural product futures market.

“At the same time, we should use the opportunity of accelerating the current scale, information, and modernization of agriculture to gradually establish China’s agricultural data system and its vocal channels for authority, unity, and system; we must improve and perfect the food price and cost monitoring system, and expand Food information collection channels, expanding information sources, and strengthening the interface between food price monitoring in the international market and domestic food price early warning mechanisms.”

Yan Bo, director of the Department of Policy and Regulation of the State Grain Administration, said that in the increasingly integrated international and domestic markets for agricultural products, it is also necessary to make full use of the two markets, make rational use of WTO rules, strengthen multi-level international cooperation in the food sector, and improve food trade policies.