Price Formation And Influencing Factors Of Fresh Citrus Fruit In China

China is a large citrus producing and consuming country in the world. At the end of2011, the acreage and production of citrus are more than any other country in the world. And acreage has reached2288.3thousand hectares, while production has reached29.44million tons. The rapid development of the citrus industry has made an important contribution to meet the demand of domestic consumers, increase the income of farmers and reverse the trade deficit. However, there are some problems in the development process of citrus fruits industry. For instance, yield level and the proportion of exports are still relatively low. Also, the contradiction between small production and big market is prominent. Especially in a market economy, the price of citrus usually fluctuates, and it is difficult to grasp the price variation. Citrus producers often suffer large economic losses from the market. So it is important for us to identify the main affecting factors and grasp price fluctuations and formation mechanism.Taking citrus prices as the main line, it is studied more systematically and comprehensively about price fluctuations and formation mechanism in the Chinese market economy. First, this paper briefly reviews the process of institutional change about price of citrus, and analyzes price volatility characteristics and cycle over the years. Then, the influencing factors which cause the changes of producer prices and consumer prices are discussed. Subsequently, reseller market which has set up a bridge between the producer and consumer markets has been introduced in the study, and a model which considers equilibrium of three markets has been established, followed by a empirical analysis. Finally, price-prediction of citrus has been made.This paper has several innovations.(1)This is the first time to study citrus prices and its formation mechanism in deep, and the possible factors which cause price fluctuation from the production areas to the consumer area. Otherwise, the key impact factors have been determined.(2)With theoretical analysis, it is the first time to put extremely complex circulation into the price model. The EDM model reflects that how price reaches the equilibrium price through the producer market, reseller market and consumer market. The results of this model are closer to reality.(3)The research method of citrus price transmission is innovative. Because the study about citrus price’s bidirectional conduction between producer market and consumer market considers the reseller market and the balance of three markets, which gives a more convincing result compared with other research.Through this research, conclusions are drawn as following: Firstly, the process of citrus price’s institutional change is very complex and the administrative privileges of citrus price have been revoked and delegated repeatedly since1949. After market opening, citrus industry has developed rapidly with acreage, yield and farmers’income increasing. Also there are some problems as the price often goes up and down, and it is difficult to manage. Through the history of citrus price’s institutional change process, price is determined by the markets, which has been proved effective. However, the market regulation does not always work properly. Government can offer guidance at the appropriate time to balance the interests of producers, resellers and consumers and promote the development of citrus industry.Secondly, the fluctuation rule of nominal producer price and actual producer price are analysed. The result shows that the fluctuation of nominal producer price is very severe and has obvious rising trend from1950to2011, while the fluctuation of actual producer prices which excludes the influence of inflation factors gently and shows no upward trend.Thirdly, using HP filter method to analysis the actual producer price of citrus, it appears that citrus price has strong cyclical characteristics. Citrus price can be divided into six complete cycles. And the first cycle is1978-1988, the second cycle is1989-1994, the third cycle is1995-1996, the fourth cycle is1997-2002, the fifth cycle is2003-2005and the sixth cycle is2006-2010. It is found that the average cycle of citrus price fluctuation is5.7year. Also the fluctuations cycle is unrepeatable and asymmetric.Fourthly, through theoretical and empirical analysis, it is found that production costs, production, natural disasters, net exports, the exchange rate and export prices are influential to citrus’producer price. While production costs, natural disasters and production have strong combined effect on citrus’producer price. Besides, important influence factors which have direct and indirect impact are also considered.Fifthly, based on the demand viewpoint to research citrus price, it is actually research the consumer price of citrus. Through the theoretical and empirical analysis, it shows that the consumer prices of citrus are affected by apples price, bananas prices, CPI, GDP, income, population and urbanization level and so on. Through the exogenous shocks of influencing factors, income, CPI and apples price has strong impact on consumer prices, while urbanization and bananas prices have lesser impacts on consumer prices.Sixthly, we make a empirical analysis on theoretical of citrus price formation, and draw conclusions:(1) In the simplified theoretical model, the impact from the exogenous variables to citrus producer price from largest to smallest is labor price in production, capital price in production, income, price of apple, input prices of labor and input prices of capital. In addition, the impact from the exogenous variables to citrus consumer price from largest to smallest is labor price in production, capital price in production, income, input prices of capital, input prices of labor price and price of apple.(2)Price conduction between the citrus producer and consumer markets is asymmetric. The empirical results show that the transmission elasticity from the producer market passed to the consumer market is0.7256under the exogenous shocks, while that the transmission elasticity from the consumer market passed to the producer market is1.5926under the exogenous shocks.(3) The empirical results show that there exists reduction effect in the citrus producers and consumer market. That is, under the exogenous shocks, the extent of variation of production is bigger than prices. And this conclusion is contrary to previous studies.Seventhly, in order to give producers, brokers and consumers some help, we try to forecast the producer price of citrus in the next nine years. The predictions suggest that the producer price of citrus are RMB108.0071,110.5691,113.1311,115.6931,118.2550,120.8170,123.3790,125.9410and128.5029per fifty kilograms from2012to2020.Finally, in order to stabilize the prices of citrus market and promote the healthy development of citrus industry, we should make the following efforts:enhancing the farmers’ organization level; regulating the reseller market; reducing administrative intervention in citrus circulation; establishing an information release platform; strengthening the construction of standardization of citrus industry; designing a reasonable benefit share mechanism.