Pigs and pigs...a legend of rising prices

Observing the trend of prices in the past decade, it is not difficult to find that pork prices and prices go hand in hand. CPI (Consu-Mer Price Index) is dubbed the "Chinese pork index" (C hina Pig Index).

Since the beginning of this year, the price of pork has soared, surpassing the highest level in the pork market in 2008. At the same time, the consumer price index (CPI) also climbed steadily, setting the highest year-on-year increase in three years. Many analysts believe that current and rising prices in 2004 and 2007 all show obvious structural inflation characteristics. That is, rising food prices dominate the rise in CPI, while pork prices are the “leader brothers” in food prices.

Zhou Wangjun, deputy director of the price division of the National Development and Reform Commission, said earlier that including the current round of rise, China has experienced three rounds of price increases since the beginning of this century. The first round was from 2003 to 2004. The second round was from 2007 to 2008. This round of price hike has so far lasted for 24 months.

On the other hand, domestic pig and pork prices have also experienced three distinct price fluctuations in the last decade, with an average cycle length of about 30 months. The first two rounds peaked in September 2004 and January 2008, respectively, and this round of pork price hikes is at its peak “window period”.

Can't get around the "pig cycle"?

From 2003 to 2004: At the beginning of the stage For people who are now accustomed to racing against inflation, the focus of macroeconomic regulation before 2003 was "governance of deflation," which seems to be somewhat indecisive. At the time, the live pig market was also in a relatively long period of adjustment. The market was relatively balanced in supply and demand, and the price fluctuations were not significant.

However, in the second half of 2003, the calm was broken. In November 2003, the long-term low CPI plummeted to 3%, and the first round of price increases since the new century kicked off. By the end of 2004, the year-on-year growth of CPI remained at a level of over 3%, and peaked at 5.3% in July and August 2004.

At the same time, at the same time, affected by the SARS epidemic, farmers slaughtered sows and stalled stagnated livestock, causing tight supply of live pigs. The unexpected "bird flu" incident at the end of 2003 triggered residents' fear of poultry meat consumption and boosted pork consumption.

From the end of 2003, the price of live pigs began to rebound significantly and continued until the second half of 2004. The price of pigs entered the first peak of the decade.

2007 to 2008: Crazy "Pig Song"

At the beginning of 2006, a "song of pigs" was popular in the north and south of the country, and pig-breeding counties in Sichuan, Chongqing and other places spent a lot of money to scramble for the copyright of songs. At that time, people might not have thought that the pig price bull market that has been going on for nearly two years is being brewed.

In the second half of 2006, there was an outbreak of acutely lethal blue-ear virus. For a time, people talked about the change of pig color, and the pig industry suffered heavy losses. In early 2007, the impact of the epidemic on the price of pigs began to appear, and the price of pigs has experienced a historic uptick. By February 2008, the wholesale price of fresh pork had reached a record high of 22.88 yuan per kilogram.

As the price of pigs soared, the consumer price index was also rising sharply. At that time, there was a saying circulating in society: "You can't run but Liu Xiang, but you can't run CPI." From March 2007 to October 2008, the CPI continued to exceed 3% again, of which the CPI for the 12 months increased by more than 6% year-on-year, and in February 2008 it had an inflation peak of 8.7%.

Throughout 2007, pork prices rose by 50% and CPI rose by 4.8%. Taking the pork price as the CPI weighting at around 3%, the increase in pig price for the year was 1.5% for the CPI, and the contribution of all other commodities was only 3.3%.

From 2009 to now: both newly record pork prices after a correction from May 2008 to May 2009. Since June 2009, the current increase in pork prices has started. However, in the first half of 2010, due to the oversupply of the market, pig farmers caused slaughter in advance, the price of pork recovered, and the CPI continued to rise.

During this time, vegetables grabbed the thunder of pork. In 2010, high vegetable prices became the primary factor driving up CPI. According to a press conference held by the National Bureau of Statistics, fresh vegetable prices rose by 25.5% year-on-year in February, and fresh fruit prices rose by 19%. The impact of these two prices on CPI accounted for nearly one point.

However, as pork prices began to pick up in July 2010, pork prices and CPI re-entered the same track of rising prices. Until June of this year, the wholesale price of fresh pork was more than RMB 23/kg, and it continued to rise. The CPI increased by 6.4% year-on-year, and both had the highest record in three years.

According to Zhou Wangjun’s judgment, from the historical experience, the current price increase is approaching the inflection point. Many analysts also believe that as pork prices stabilize and fall, the year-on-year increase in CPI will gradually decline.

Is it the scourge of pork?

China's economy is tightly focused on pork The United States’ Dow Jones' "Market Watch" website reported that China's pork prices have become the "food focus" of the people.

With regard to the four major macroeconomic issues, the biggest test China faces this year will undoubtedly come from inflation. This may have become the consensus of all parties in the country. But if you are a foreigner, you may find an interesting problem: China's economic fluctuations are being affected by the price of pork.

As early as early July, many overseas media reported that “pork has pushed up inflation in China.” Reports from Japan’s “N ew s-postseven” magazine analyze that China’s inflation is accelerating, and one of its biggest promoters is actually pork. the price of.

Foreigners may not understand how pork prices “kidnapped” China’s macroeconomics. Answering this question is actually very simple: One of the major economic tasks of the Chinese government this year is to control commodity prices. The recent sharp increase in pork prices has caused a year-on-year increase in the CPI, so the next step in paying attention to and affecting pork prices has become a macroeconomic one. Key aspects.

Then the next question arises again. Why does pork price affect C PI? The possible reasons include at least two aspects: First, the recent surge in pork prices has risen by 57.1% year-on-year in June; second, pork prices have been higher in the CPI.

The National Bureau of Statistics’s Information Service told the “Economic Information Daily” reporter: “Pork is one of the 262 basic categories in China’s C PI commodity basket. Due to different changes in prices, the proportion of various goods and services in the C PI commodity basket is also As a result of the changes, the proportion of pork in the CPI basket fluctuates around 3%."

According to estimates by the relevant agencies, a 20% increase in the price of pork will affect the CPI by about 0.6%; if it takes into account other foods, it may affect the CPI by about 1 percentage point. Some analysts even believe that if one considers the impact of pork prices on overall food, pork prices may reach 9% in the CPI.

“The proportion of pork prices in the CPI is too high. The price of pork is too sensitive. We should reduce the weight ratio so that the country and the industry can be relaxed.” One person engaged in hog farming bluntly.

Li Guoxiang, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences, told the "Economic Information Daily" reporter that the issue of weight cannot go from concept to concept. Even if the weights are set very low, the people's real life experience still remains. After the rise in pork prices, the people either buy more pork or reduce pork consumption, which means a decline in quality of life.

Pork prices and CPI: The debate over chickens and eggs is whether pork prices have pushed up China's CPI, or whether the high CPI has driven pork prices? Is this a mystery of a chicken or an egg?

For this round of inflation, many people are targeting the price of agricultural products, especially pork prices, and believe that it constitutes the “primary power” for this round of inflation. There are not a few views that hold similar attitudes. A recent report released by Everbright Securities stated that the current CPI inflation has been clearly structural. In the eight categories that make up the CPI, if you take away food and live, then the remaining six categories of inflation are almost zero. Therefore, the key to analyzing inflation is to look at the trend of food prices. In recent months, CPI inflation has gradually risen under the upward push of food prices. The rapid rise in the price of food is the most noticeable rise in the price of pigs, which is the main driver of recent food price increases.

Li Guoxiang believes that price is a measure of inflation, and that rising prices is inflation. CPI consists of many different consumer product prices, with pork being the largest single product. Every time the price of pork rises, it is directly reflected in prices, and the impact on prices is quite high. From this point of view, when the price of pork rises, inflation appears to have occurred.

However, Li Guoxiang pointed out at the same time that from a deeper level of perspective, inflation is also caused by large currency circulation, rapid economic growth, and excessive investment, which are reflected in pork prices. The reason why the price of pork has risen rapidly recently is mainly due to the rapid growth of the economy and the rapid changes in the food consumption structure of residents. In addition, rising food prices and rising labor costs in recent years have also been reflected in the rise in pork prices.

Some analysts believe that rising CPI will also boost pork prices. The reason is that rising prices will not only increase feed prices (such as corn), but will also increase labor costs, and both will drive up pork prices from a cost perspective. Although the impact of pork and CPI is mutual, overall, the impact of pork prices on CPI is greater than the impact of CPI on pork prices.

Whether it is a phenomenon or a reason The rise in pork prices is only a prominent phenomenon in inflation, and it can only affect the level of the inflation rate evaluation, but cannot be the cause of inflation.

Sun Yumei, associate professor of the China Institute of Economic Reform and Development at Renmin University of China, believes that the occurrence of inflation is not caused by the price rise of a certain commodity, but is the result of long-term accumulation of super-currency in the market.

Sun Yongmei told the reporter of the "Economic Information Daily" that after the outbreak of the international financial crisis, the deflation problems in some countries were outstanding, bringing great worries to China's economic development. In order to prevent the economic downturn, the Chinese government has adopted an “extremely loose” monetary policy to ensure growth through super-currency. Although the loose monetary policy has a significant effect in promoting economic growth, a huge amount of super money has accumulated in the market, and it is difficult to digest for a long time. A lot of extra money has flowed disorderly in the market and there have been speculation and fried garlic. Strangely frittering prices, such as fried peppers, have brought enormous inflationary risks to Chinese economic entities. In addition, there are lags in China's control policies, and the lack of timely tightening policies to curb inflation has led to an increase in inflation.

Zhou Jingyi, senior economist of the Strategic Development Department of the Bank of China’s head office, told the reporter of the “Economic Information Daily” that regardless of actual analysis or theoretical research, the increase in prices is the result of the combined effect of demand pulling and cost promotion. The biggest difference in inflation in our country several times ago. First of all, due to the absolute increase in demand and the relative reduction in supply, the continuous rise in China's agricultural product prices will be a medium-to-long-term trend. Secondly, the "Lewis Turning Point" is approaching, and factor price reforms have caused the rising costs of labor, land, and water and electricity. Third, the prices of international bulk commodities, including crude oil, iron ore, copper, and grain, will remain high, and input inflation in China is expected to be difficult to eliminate in the short term. Fourth, the short-term surplus of the current account is difficult to reverse, and the appreciation trend of the renminbi will remain the same. The passive supply of domestic currency will continue, and sufficient liquidity is a necessary condition for rising prices.

Questioning pig prices ups and downs control policy suspected to amplify the fluctuations When the pig price is low, there is no subsidy. When the pig price is high, the subsidy will be given. It is easy to amplify the price fluctuation.

"As soon as the national subsidy policy came out, there was a concern in the industry." Talking about the state's regulation of the live pig market, a market source told reporters. According to reports, the “Circular on Promoting Steady, Healthy and Sustainable Development of Pig Production and Prevention of Market Supply and Price Fluctuations” issued by the State Council at the end of July of this year requires that all localities continue to raise rations for trophy sows at a rate of 100 yuan per head per year. subsidy.

In fact, when the "visible hand" hopes to smooth out the volatility of the pig price, the result may be counterproductive.

The lessons of 2007 are not far away. The country’s investment in supporting the development of pig production reached more than RMB 15 billion in the year, including subsidies for fertile sows. As a result, the amount of short-term sow breeding increased dramatically. The imbalance in supply and demand became more and more serious. This became 2009. The main reason why the live pig market continued to be sluggish until the loss.

This regulation has been described by some scholars as "passive, immediate, price control," and it appears to be powerless or even negative when dealing with external shocks.

Apart from the subsidy policy, the main means for the government to control the price of pigs is to store, store, and release reserves. In accordance with the State Council's Opinions on Promoting Pig Production and Stabilizing Market Supply and the Regulation Plan on Preventing Over-Declining Swine Prices (Interim) (hereinafter referred to as the “preplan”), when the pig/food ratio is higher than 9:1, the government will release The government’s frozen meat reserves, if necessary, will grant temporary subsidies to urban and rural residents with low-income students and students in families with financial difficulties. When the pig-food ratio is lower than 6 to 1, the central and local frozen pork reserves will be increased according to market conditions.

In the first half of 2010, the pig-to-food ratio fell below the break-even point of 6 to 1. The National Development and Reform Commission, the Ministry of Commerce, the Ministry of Finance, and the agricultural sector started the three-level and two-level response mechanisms stipulated in the “preplan” in batches, thus deterring the hog The price fell too quickly. Recently, as the price of pork has soared, many cities have again put reserve meat on the market.

However, according to analysis, the cost of collecting and storing pork is relatively high. On the other hand, future sales will also have a great impact on the market. Therefore, this is not a policy that can be implemented frequently. It can only be a policy in an emergency.

Li Guoxiang believes that there is no government intervention in the pork market, and the price fluctuations are inevitable. The government's intervention through subsidy or stock-receiving may reduce the fluctuation of pork price, but it may also amplify the fluctuation. When the pig price is low, there is no subsidy. When the pig price is high, the subsidy will be given. It is easy to amplify the price fluctuation.

It is difficult for large-scale breeding to reach a supply gap caused by the withdrawal of a large number of free-living households in the short term. This is the main reason for the soaring pig price this year.

Chen Mengshan, chief economist of the Ministry of Agriculture, believes that this time, the number of live pigs that have appeared since last year has decreased, mainly in scattered households. We must seize the favorable opportunity for the current recovery and development of hog production, promote structural adjustment of hog production, change the mode of development, and vigorously promote large-scale farming.

When it comes to avoiding the price of a “roller coaster” market for pigs, government officials, business people, and academics have all issued prescriptions for “scale farming”.

According to industry insiders, large-scale aquaculture enterprises have a high level of production and strong ability to respond to the epidemic, and can effectively control the rise in costs and feed prices. In general, feed costs account for about 60% of pig production costs in pig production. In recent years, the price of food, including corn, has risen sharply. Large-scale enterprises have advantages in coping with rising costs.

At present, pig production is still dominated by professional household breeding and small and medium-scale farming. Industry sources pointed out that the live pig market is in the process of shifting from retail to main-scale farming, but scale farming is a long-term goal and it is difficult to achieve in the short term.

Li Guoxiang believes that large-scale farming contributes to the stability of the pig price, but it is only a necessary condition rather than a sufficient condition. If the government's control method does not change, the price fluctuation may not necessarily be reduced.

There has been no substantial progress in hog futures. Industry insiders pointed out that the market conditions and timing for the launch of "hog futures" in China are basically mature.

Not long ago, the “pig grab” caused by the high pig price also left people with a curiosity: will overfilling the bargaining site foreshadows the plunge in the price of pigs? Do not blame the "blind" behavior of pig farmers, because when "small-scale production" faces the "big market," it is easy to make mistakes and suffer losses because of the asymmetry of market information.

Analyst Guo Huiyong, an analyst at Oriental Agri Consulting Co., Ltd., said in an interview with a reporter from the Economic Information Daily that the flow of information is not smooth, and farmers usually obtain market information through middlemen and pig traders, which may distort market information. The information on the amount of live pigs in the entire industry is also not timely and accurate. When surplus or deficiency has occurred, the farmers only know that they can only make adjustments afterwards and the response to price signals is lagging behind.

Whenever pork prices fluctuate significantly, hog futures are pushed into the spotlight. However, "the thunder is loud and the rain is small." The Dalian Commodity Exchange has been promoting the listing of hog futures, and there has been no substantial progress.

Jinpeng Futures Deputy General Manager Yu Mengguo told the “Economic Information Daily” reporter that in the commodity futures market, whether grain or oil, the price fluctuations are smaller than those without futures. The price discovery function of live hog futures can reduce pork price volatility, which is beneficial to protect the interests of pig farmers and consumers. The pig farmer can use the price signal of the futures market to decide how much to produce and what price to sell, and to reduce the asymmetry of information. Live pig processing and circulation can also be used in the futures market to preserve value and manage market risks.

Industry sources pointed out that the current market conditions and timing for the launch of “live hog futures” in China have basically matured. First of all, China's "hog futures" trading market has great potential. At present, the total number of pigs produced is about 600 million heads, accounting for about half of the world's total production. Next, the annual professional scale of pigs with more than 50 pigs has reached about 40%, which can activate the vitality of market transactions. The rapid promotion of domestic excellent lean-type pigs, as well as the easy classification of breeds and grades of live pigs, also provides a basis for the selection of a unified subject matter for "hog hog futures". The rapid growth of a group of farmers’ associations and agricultural products leading enterprises laid the foundation for the “company + farmers” and “order + futures” business model.