Li Cui-xia,and Zhang Yu-ling

College of Economics and Management,Northeast Agricultural University,Harbin 150030,China

Introduction

The stability of grain price is that the grain price in the market mechanism can be automatically restore equilibrium or grain price fluctuation keep the original amplitude and won't expand.This paper used cobweb model theory and the analysis of Wang (2007) on grain price fluctuation for reference,and pointed that when the grain supply elasticity was greater than the grain demand elasticity,it would form a coherent web model.The grain price volatility would become bigger,and under the action of the market mechanism the price could not resume.This time we called the grain price was unstable.And when the grain supply elasticity was equal to or less than the grain demand elasticity,the grain price volatility would not be bigger or under the mechanism,it could automatically resume.At this time,we called the grain price was stable.

Many domestic and foreign scholars research on grain price fluctuation and grain security,Huang (2009) used quantitative methods to study China's grain price falling reason from 2006 to 2008 and the trends of future grain price,held that the fluctuation of international energy price and restrictions on trade policy had great effects on this period fluctuation of China's grain price,anticipated that in 2009 grain price may be continue to decline.Liu (2011) used CWARMEM model to research the trend of China's grain supply-demand balance under the background of globalization by scene area simulation,and analyzed the effect of the population,resources,economic and other factors on the changes of China's next ten years grain by Scenarios Simulation.Draw to 2020 the growth of global grain production will remain stable,but the difference of supply and demand between domestic provinces are more significant.Peng (2009) used the regression analysis,selected grain planting area,grain yield per hectare,total grain yield,population,and per capita grain possession five variables to study grain safety degree.Eventually,it concluded that if variable factors population,cultivated land and grain yield per hectare could maintain the basic development trend since the reform,then before 2020 the basic security of grain could be assured.Luo (2010) used the ARCH model such as GARCH,GARCH-M,TARCH and EGARCH to analyze the fluctuation of the grain price and volatility asymmetry.Grain market did not reflect the characteristics of high risk of high return,low risk of low return,and that shows that most traders make decisions by irrational factors in China's grain market,and pointed that China's grain market needed further development and improvement.Hendrik and Feng (2006) thought that to deal with the crisis of natural disasters and ensure the stability of the supply,China should pay attention to grain reserves.

The above researches from different angles to predict the trend of the development of China's grain,but most of them concentrate on the effect of grain production fluctuations to grain security,and some papers study the effects of the grain fluctuations only by using recent years'data.In the course of the study,the paper selected the data from 1985 to 2009 years to analyze the main reasons and factors of grain price fluctuations and then proposed the countermeasures to guarantee the grain price stability.

Judging Stability based on Cobweb Model

This paper used Wang (2007) on the basic principle judgment of grain stability for reference,used economics theories on calculating the supply elasticity and demand elasticity,and then summed up the calculation formula about grain demand price elasticity and grain supply price elasticity.

The formulas for calculation were as the followings:Grain demand price elasticity=the changing rate of per capita annual purchases of grain of urban households/the changing rate of grain retail price (formula 1)

Grain supply price elasticity=the changing rate of selling grain/the changing rate of grain retail price (formula 2)

Formulas explain: in formula (1),when calculated grain demand price elasticity,held that in a certain range rural residents were still in their own selfsufficiency so that considered urban residents as main consumers.Therefore,used the city residents'food price demand elasticity instead of grain price of demand elasticity.In the formula,the changing rate of per capita annual purchases of grain of urban households=(the year urban households'purchases of grain-the last year urban households'purchases of grain)/the last year urban households'purchases of grain,changing rate of grain retail price=(the year grain retail price-the last year grain retail price)/the last year grain retail price.The data urban households'purchases of grain and grain retail price were from China Statistical Year book issues.

In formula (2),when calculated grain supply price elasticity,held that rural households were the main suppliers for grain production.Therefore,considered grain sales=the average selling of food quantity of each rural households×rural population.In the formula,the changing rate of food sales=(the year food sales-the last year food sales)/the last year food sales,changing rate of grain retail price=(the year grain retail pricethe last year grain retail price)/the last year grain retail price.The data of rural households'grain sales was from China Statistical Year book issues,according to the formula,the result is shown in Table 1.

Compared grain supply price elasticity to demand price elasticity from 1985 to 2010,we could see that grain supply price elasticity generally was larger than grain demand price elasticity.According to cobweb model theory,growth trend of China's grain price was a type of spread cobweb model.Therefore,the food price volatility increased year by year,food price was in a unstable state.

Analysis on Grain Price Fluctuations

Before 1978,under the planned economy system China's grain price influenced by state macro-control,market factors made a small role;from 1978 to 1985,China's grain still dominated by national overall planning buying and selling,the price was fixed by the national.After 1985,national released agricultural product price,market regulation as a mainly way to affect grain price.This paper mainly analyzed the grain price fluctuations and its influencing factors that from 1985 to 2010.As it is shown in Fig.1.

Table1 Elasticity of grain price from 1985 to 2009 in China

Fig.1 Fluctuations of grain price from 1985 to 2010 in China

According to the fluctuation of China's grain price,took the initial year's the lowest grain prices as a starting point,if fluctuation slope was negative,and it was divided as a stage;the termination year of the follow phase was as the next phase initial year,and then divided the next stage the same way as before.Therefore,the fluctuations of grain price could be divided into three periods: 1985-1990;1990-2000;so far in 2000 (although in 1990 and 1997,the price index was also a negative value,but on the principle of float more than 3%,so the second stage was extended to 2000).

From 1985 to 1990,grain price was mainly affected by national policy and relation between supply and demand.In 1985,national cancelled overall planning buying and selling system,market regulation components increased.Affected by the producers'inwardly expected,in 1986 the grain yield dropped,grain price continued to rise.The rising of grain price increased the farmers'enthusiasm of planting.In 1990,grain overproduction made grain price drop dramatically.

From 1990 to 2000,the fluctuation of grain price became larger.In 1990,lower grain prices affected the producers'enthusiasm,and then in 1991 grain yield declined obviously,demand exceeded supply,grain prices continued to rise.In 1994,the state carried out unified purchase policies,the purchase ratio reached 70% to 80% of total grain that made the grain production risen stable,grain prices gradually fell back.

Since 2000,China's grain price fluctuation has slowed down.In 2003,China's grain price rose bigger,that was because from 2000 grain production continued to decline,the shortages of grain supply resulted that the grain price rose considerably,and then stimulated the farmer's enthusiasm.In 2004,in the case of higher national grain yield,domestic grain supply and demand situation eased.

Analysis on Grain Price Influencing Factors

The grain price fluctuations are affected by the policy changes,related industry development and market factors.This paper mainly analyzed the effect of market factors on the grain price fluctuations.By the further analyses,the paper held that the grain price fluctuations were mainly affected by the variation of supply-demand,speculation and psychological expectation.As it is shown in Fig.2.

Fig.2 Effects of grain price

Countermeasures and Suggestions to Make Stable Food Price

Research shows that the grain price fluctuations are mainly affected by demand shift and producers'internal expectation.The little change of the demand for grain will impact the grain price's fluctuations widely,and the producers'internal expectation help to encourage higher or cause lower rice price.Therefore,based on the current grain price fluctuations,we put forward the following countermeasures.

Firstly,increase grain reserves.To reduce grain price fluctuations caused by natural disasters and human factors,China should reserve grain designedly that can ensure grain security and guarantee the grain price stability.

Secondly,increase the production of high quality grain.Encourage farmers to grow high quality grain,and ensure "high price for good quality grain",so that can not only increase unit area grain income,but also can meet the urban residents'high quality requirements for agricultural products.

Thirdly,build good market develop system.Grain price's fluctuations are mainly affected by macro environment and national policy.The big change of the environment will affect the producer's inwardly expected and the consumers income level.Therefore,China environment plays an important role for the stability of the grain price.

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