Can the prices of agricultural products rise or fall curse?

In Shandong, Inner Mongolia and other places, the prices of agricultural products such as cotton, ginger, garlic, potatoes and other products have plummeted recently, causing concerns about hot money speculation and farmers’ losses. However, judging from past experience, apart from purchasing and storage, the government has no better way to guide agricultural products out of the cycle of skyrocketing plunge.

Zheng Fengtian, professor of the Institute of Agriculture and Rural Development at Renmin University of China, said that ginger, garlic, small grains, and other cash crops are becoming a "casino" for Chinese farmers, maintaining a balance of benefits in the skyrocketing plunge.

Ma Wenfeng, an analyst with Beijing Oriental AIG Agricultural Consulting Co., Ltd., said in an interview with the “First Financial Daily” yesterday that as early as two or three months ago, he had already made an early warning of the fall in the prices of agricultural products. On the one hand, the price of agricultural products soared last year. With a substantial increase in area, there will be a situation where supply exceeds demand. On the other hand, the tightening of monetary policy will also directly affect the price of agricultural products.

Ma Wenfeng stated that last year, the increase in agricultural product prices was not caused by supply shortage, but was driven by the oversupply of money. Regarding the sharp fall in the prices of agricultural products this round, the sudden brake on the supply of money is more important than the expansion of the acreage of agricultural products.

Zheng Fengtian believes that hoarding is also one of the reasons for this round of decline. As ginger, garlic, and other agricultural products are resistant to storage, local farmers and foreign capital would all be stocked in cold storage when prices were high last year. When prices fell, sellers were shipping. Plunge.

The price fluctuations of small cash crops such as ginger and garlic are most suitable for confirming the “cobweb theory” of economics. That is, when supply and demand determine prices and prices guide production, there will be a cyclical fluctuation in the economy. For example, when the supply of a certain product falls short of demand in the first period, the price rises, the second period must increase in production, and the price decreases; as the second period of price declines, the production decreases, and the price rises; the third period of production increases again. The price has dropped again. The price and output waves of each period are animated in a graph. This graph is similar to a spider web and is therefore called the "cobweb theory."

The market demand for ginger and garlic is limited. Once the scale of planting expands market demand, the decline will become inevitable.

Zheng Fengtian said that a phenomenon that is very noteworthy at present is that commercial farmers grow cash crops. These farmer households are not traditional farmers. They have made money from other sources. They have rented several hundred acres of land to see what kinds of economic crops are profitable. Therefore, they disrupted the supply and demand balance of the original agricultural products, thereby aggravating the sudden rise and fall of agricultural products.

Ma Wenfeng stated that as the country implements a system for the collection and storage of major agricultural products, wheat, corn, and rice have a minimum purchase price, which ensures that the prices of these major agricultural products will not fluctuate greatly. An important reason for this year's lower cotton prices is that the minimum purchase price of 19,800 yuan per ton is indeed too low. If it can be set at 22,000 yuan, farmers' losses will be reduced.

Zheng Fengtian believes that information asymmetry is an important reason for the oversupply of agricultural products. Farmers often fail to sell them to find many people planting. Therefore, he suggested that the Ministry of Agriculture advance the statistics of the sown area after the harvest to the sowing area before sowing, and conduct pre-statistic of the sown area. Give farmers timely sowing information.

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