Asymmetric Transmission Research Based On The View Of Perishable Property In Agricultural Products In China

In recent years, a great deal of concern has been focused on abnormal fluctuations in prices of agricultural products in China. Existing research have shown that fluctuations in the prices of agricultural products have three properties, synchronism, systematic linkage and conductivity which lead to the asymmetric price transmission. The concrete manifestation of the phenomenon of asymmetric price transmission shows that the retail prices of food and agricultural products rise much higher than the producer’s price that farmers can feel, on the other hand, farmers can feel the descent in the price quickly since the speed of declining price can transfer rapidly to the production processes and even sharply. The above-mentioned asymmetric transmission phenomena in the vertical related markets lead farmers to suffer less profit in the price rising but bear more risks in the price declining. Therefore, it is necessary to find out the factors that lead to asymmetric price transmission.In accordance with the theory of price transmission, under the conditions of perfect competition, and taking into account that the price of agricultural production can not be adjusted in the short term, no matter the retail price is rising or declining, the fluctuation will be even greater when passed to the production process. However, the reality of asymmetric price transmission is clearly inconsistent with the theoretical price changing situation in a perfectly competitive market. The present research, based on the existence of monopoly power in the circulation of agricultural products market, draws the conclusion that perishable character of agricultural products will exacerbate the contrast level of market power in the production processes and intermediate circulation, leading to the phenomenon of asymmetric price transmission.The overall goal of this study is to find out the factors that lead to agricultural asymmetric price transmission in China, especially for the phenomenon of asymmetric reactions to price increases and decline based on the perishable character, then further explore the effect of government support policy for implementation in perishable agricultural products storage. The significance of this research is to provide a strong theoretical basis for China’s price control policies on agricultural products from a new perspective to explore ways to strengthen the price regulation on agricultural markets.This study explores the mechanism of asymmetric price transmission and storage of perishable agricultural products and assess the policy effects on perishable products along with the route of the "research premise-research perspective-Policy Assessment", taking fruits and vegetables for example, choosing ten kinds of fruit and vegetable products such as apples, pomes, potatoes and cucumbers, using economic models such as co-integration analysis, Granger causality test, the error correction model of asymmetric price transmission and multiple regression, focusing on the perishable nature. The specific contents are as follows:PART ONE:The path of asymmetric price transmission in the vertical related markets of fruits and vegetables.This chapter focuses on solving the problem of the path, which means to find out the leading process in the vertical markets, which is also the premise of the asymmetric price transmission. To analyze which aspect is the dominant one among fruit and vegetable markets is to analyze the basic trend of the supply and consumption and their respective importance. From the theoretical analysis, with the ongoing technological progress and the advancement of the Vegetable Basket Project, the total supply of fruits and vegetables in general has been sufficient; as income increases, people have paid more attention on the quality of fruits and vegetables, the degree of safety and nutritional needs. The upstream producers sometimes are less sensitive to the demand changes in downstream consumer, while downstream enterprises can apply directly to the changing demand among consumer, then, downstream enterprises can implement the consuming demand to the upstream. Compared to the supply market, the importance of the consuming market is more significant, which means the fruit and vegetable retail prices may show lead to the purchase price. Along with such analysis, the contents use co-integration analysis and Granger causality test, and measurement methods to test the products such as apples, pomes, bananas, citrus, potatoes, ginger, cabbage, tomatoes, cucumber and spinach. Then, this paper draws the basic conclusion that the changes in demand for fruit and vegetable market is increasingly important, and the prices conduction path shows that the changing purchase price leads to retail price changes.PART TWO:The impact of the perishable nature of fruits and vegetables on prices.Former researches are lack of taking account of the conditions of monopoly power in circulation of agricultural products in China, and the phenomenon of asymmetric reactions in agricultural products because of the perishable nature. Monopoly power in the middle circulation of agricultural products in China is of certain scale, they have a stronger bargaining power compared with farmers, which makes retail prices go up a lot with less increase in purchase price, while retail prices fall, purchase prices responds relatively more quickly; perishable character of agricultural products let farmers be in a weak position in the bargaining, which exacerbates the degree of the monopoly power in the middle of the flow of business, therefore, for perishable agricultural products, when retail prices rise, the purchase prices increase slightly; when the retail prices decline, the purchase prices fall even more sharply. So, the research describes the impacts on asymmetric price transmission in two dimensions from the perishable nature. The first dimension is the comparative analysis about the store fruits and vegetables (apples, pomes, potatoes, ginger and Chinese cabbage) with perishable ones (citrus, bananas, tomatoes, cucumber, spinach). In this part, asymmetric price transmission model is used to compare the characteristics of the10kinds of products. The second dimension concerns about perishable fruits and vegetables (summer cucumbers and tomatoes) and perishable-resistant fruits and vegetables (winter cucumbers and tomatoes). At last, the research draw the basic conclusion that there are stronger asymmetric price transmission in perishable products (bananas, oranges, cucumbers, tomatoes and spinach) while the asymmetric price transmission in perishable-resistant products is weaker (apples, pomes, potatoes, gingers and cabbages); from the comparison of different seasons, cucumbers and tomatoes are perishable in summer so the asymmetric price transmission is stronger, but the asymmetric price transmission is relatively weaker in winter. Therefore, the more perishable fruit and vegetable products are, the stronger the asymmetric price transmission is, the less perishable fruit and vegetable products are, the weaker the asymmetric price transmission is.PART THREE:Assessment of the effect of government policy to support the storage of perishable agricultural productsAsymmetric price transmission in agricultural products in this study will damage farmers’ welfare, they suffer less profit when the retail prices are rising but take more risks when the prices are declining. Under the confirmed premise that the perishable nature will lead to asymmetric price transmission, theoretically, the Government supports will reduce the asymmetric price transmission by increasing the bargaining power of farmers, but in practice, few empirical analysis has focused on government support for implementation of the policy. Based on the survey of pomes farmers, Research Three use multiple regression model to evaluate the effects of government policy. The basic conclusion in this part is:in those variables which reflect the degree of government support on storage facilities, whether to use the storage facilities and the distances of these facilities significantly affect the selling prices, the former influence is positive while the latter is negative; in those variables which reflect the degree of government support on extending the multi-technological services, whether through cooperation, cold storage and other non-governmental organizations have a significant effect on pomes sales price. Therefore, the policy on storage facilities is effective, as well as the Government encouragement on the development of a diversified technology services to promote channels, in particular, to courage the non-governmental organizations to develop and promote science and technology services.Policy implications brought from above conclusions are as follows:since the asymmetrical prices transmission is different in accordance with different products, the Government should develop specific appropriate measures; for perishable fresh fruit and vegetable products, the government should gradually accelerate the cold chain storage and transport system; at the same time, the government should encourage the development of a wide range of technology services to promote channels, non-governmental organizations (NGOs) in particular, so better technology services can be promoted according to farmers’need and the level of knowledge could also been improved.The first innovation of this study is the research perspective. The former researches mostly have focused on just one factor when analyzing asymmetric price transmission. They mainly discussed the asymmetric reaction of the production processes based on the view of the monopoly power. This study further discussed the effects of perishable property on asymmetric price transmission. So, the present research is an exploratory study and beneficial supplement of the similar researches. Secondly, the former researches only use the qualitative and descriptive analysis to government policy support on storage. There are few empirical researches at the farm level. This study uses microeconomic survey data, assesses the existing policies and measures, and indicates the direction of policy support on storage of perishable agricultural products.