What caused food prices to rise in parallel with food prices?

As the saying goes, "Things are scarce and valuable", but the food harvest is good. Why are food prices still rising?

Everyone is concerned that, while China’s total grain output has increased for many consecutive years, grain prices have continued to rise for many years. Compared with 2003, the grain production price (ie, the price of grain sold by farmers) has risen by 81.1%, and food consumption has increased. The price has risen by 76.8%. This year, China's grain is expected to increase production for the eighth consecutive year, but food prices are still rising from last year. Why does grain production increase for many years and food prices continue to rise? What is the relationship between grain production and food prices in China?

Li Guoxiang, a researcher at the Chinese Academy of Social Sciences Research Institute, believes that the reason for the parallel increase in food prices and production increases is indeed worth exploring. An empirical study of the relationship between food production and grain prices since the reform and opening up has shown that food production has a very insignificant impact on food prices, usually without significant fluctuations in food production; only if food production fluctuates significantly Only a significant impact on the food market will result in fluctuations in food prices. Since 2004, China has implemented a series of policies for strengthening agriculture and benefiting agriculture, abolishing agricultural taxes, continuously increasing grain subsidies, liberalizing the grain purchasing market, implementing the policy of supporting the city’s purchases, maintaining overall stable production growth in grain production, and achieving annual grain production. The change in the total production increase is relatively small, and the increase in grain production in successive years does not bring about a drop in food prices.

What caused the continued rise in food prices? From the micro supply factors that affect food prices, cost promotion is the most important reason for rising food prices. With the development of economy, China's agricultural production factor input is undergoing major changes. Not only are high-quality seeds and chemical inputs increasing, but with the large-scale transfer of rural labor, agricultural machinery has replaced labor, land circulation and large-scale operations, and professional production has been replaced by scattered Smallholder production is becoming more and more common. In recent years, the prices of agricultural production materials and their factors have increased significantly. From 2003 to 2009, among the input factors for rice, wheat and corn production in China, the prices of variable input units represented by seeds and fertilizers as well as workers' wages and land rental prices increased significantly, with the lowest increase. Nearly 90%, the maximum increase of about 185%. During the same period, the average sales price of rice, wheat and corn produced in China rose from 1.1 yuan/kg to 1.8 yuan/kg, up only 61.9%. The increase in food prices is significantly lower than the increase in the prices of some major inputs and their elements in food production.

From the perspective of macroeconomic factors that affect food prices, monetary liquidity has been abundant in recent years, providing necessary conditions for rising food prices. Although money supply is not a sufficient condition for rising food prices, the empirical analysis of the relationship between the growth of China's money supply and food price fluctuations since the beginning of reform and opening-up shows that in the extreme case of a sharp increase in the money supply, it often induces lagging food prices. rise. In addition, the country has continued to increase the price of grain-based food support, and has strengthened the expectations of food producers, processors and operators on rising food prices.

Although China’s grain production has increased year after year, it has not brought stability in the absolute level of food prices, but it has avoided the dramatic fluctuations in food prices and the occurrence of some vicious food security incidents, with obvious results. In recent years, the food price fluctuations in China have been significantly lower than the fluctuations in global food prices. Even in the domestic market, the food price fluctuations in recent years are significantly lower than the price fluctuations of other agricultural products. It can be conceived that if China’s grain production does not have a bumpy harvest for many years, domestic grain prices in the past two years will rise even more under the influence of rising costs and speculative factors, and will inevitably fluctuate violently along with the international market and stabilize China’s commodity prices. The overall level will pose a greater threat.

In the case of increasing production year after year, moderately rising food prices and maintaining a reasonable level are of great practical significance for stabilizing food production and ensuring effective supply, and are also the orientation of macroeconomic control policies. If people artificially curb food prices in the short term and worsen the benefits of grain production, it will certainly dampen the enthusiasm of farmers for grain production. The consequence is that there is a serious shortage of domestic food production and the food price has skyrocketed.

In the future, in order to better meet the needs of economic development and improvement of living standards for food consumption, reduce the rise in food costs and ultimately pass it on to consumers, protect the reasonable income of grain farmers, and improve China's food policy, we must consider at least three aspects: to promote reasonable food prices. Rising, so that consumers in the income increase while at the same time, part of the rising costs; continue to increase grain and agricultural subsidies to stabilize and improve the comparative efficiency of grain and agriculture; accelerate the development of modern agriculture, significantly increase food production efficiency.