The pressure of long-term rising food prices can not be ignored

China's grain prices are facing tremendous upward pressure. Although relevant departments have repeatedly stressed that “China’s grain harvest year after year, abundant stocks, and inventory consumption ratio far exceed internationally recognized lines”, such statements may help suppress inflation expectations, but they cannot reduce the long-term upward pressure on food prices.

As far as the current food prices are concerned, the most direct pressure comes from the reduction of food production caused by natural disasters. At present, the six-year increase in summer grain production has been reversed, and the autumn grain production situation, which occupies more than 70% of grain output, is not optimistic. According to the Agriculture Ministry's agricultural dispatch, as of August 19, the area affected by floods and typhoon crops in China was 164 million mu. In this regard, officials from the Ministry of Agriculture and the National Development and Reform Commission stated frankly that the production of autumn grain in China is facing uncertainty. This uncertainty has undoubtedly increased the market's expectations for future food price increases.

Of course, officials still believe that this is only a temporary short-term factor. On the whole, China’s grain is still in a balance between supply and demand. However, if we look at the longer term, we will find that the factor that determines the increase in food prices is not the relationship between supply and demand.

The most recent memory was in 2007, when the total grain output reached 501.5 million tons, making it the fourth high-yield year in history to produce more than 500 million tons. However, in the context of grain production for four consecutive years and a basic balance between supply and demand, food prices in 2007 rose 10.26% year-on-year. In fact, it is not uncommon for the phenomenon of bumper crop prices to increase so much in history.

This phenomenon is not hard to explain. When China shifts from a shortage economy in the planned economy to a relatively surplus economy in a market economy, there has been very little demand for products, and demand-led price increases are unlikely to occur. In fact, the deciding factor in rising food prices lies in the comparative benefits between agriculture and non-agricultural industries.

At present, China is in an accelerated period of urbanization and industrialization. Whether it is the reduction of cultivated land area or the decline in the relative income of grain production, the enthusiasm of farmers to grow grain will push up the cost of food supply, and the price increase driven by such supply factors will increase the It will not be completely affected by the relationship between supply and demand. This can also explain why some grain prices in China are much higher than international grain prices. Therefore, before the Lewis inflection point really arrives, China's grain prices will remain on the upward path for a long time.

In addition, the excess liquidity around the world has undoubtedly increased the pressure on domestic food prices. Because excess liquidity is always chasing the slower growth of productivity and the demand for stability, agricultural products represented by food are undoubtedly such an excellent target.

Since the financial crisis in 2008, a lot of liquidity has been injected domestically in order to maintain economic growth, but a large amount of liquidity has not yet flowed into the real economy, but it has also found its way out. When real estate meets regulation and the stock market is in the doldrums, these abundant liquidity always have to find a way out. Against this background, the agricultural products that have been hit by natural disasters this year have become a good carrier. So, there are “beans you play” and “garlic you”.