| As China’s per capita income level rises,eggs are becoming a more important part of the dietary structure,and they have become a popular source of affordable,high-quality animal protein.In order to meet the national demand for important agricultural products such as eggs,the Chinese government launched the "vegetable basket" project in 1988,which has led to a rapid increase in per capita egg consumption and greatly contributed to the sustainable development of the egg industry in China.According to the Food and Agriculture Organization of the United Nations(FAO),China has long been the world’s largest producer and consumer of eggs.In 2020,China’s total egg production reached 34.68 million tons,accounting for 37% of the global total,a share that has remained stable for a long time.In the same year,China’s per capita egg consumption of 21.75 kg,has surpassed Japan in the world’s first,China has become a veritable egg production and egg consumption countries.However,in recent years,the development of China’s egg industry has faced a number of challenges from the domestic and international development environment,especially the frequent and dramatic fluctuations in egg prices that have become a key concern for the government and the people.As an important foodstuff for food security and nutritional safety,the large fluctuations in egg prices pose a real challenge to the food security of low-income groups and have attracted the attention of government policy-making departments and relevant scholars.In the context of building a unified national market,it also brings hidden concerns about promoting the flow of market factors and strengthening the resilience of the industrial chain,reflecting the key concerns in the process of building a unified national market in China.In this background,this study constructs a theoretical analysis framework based on theories such as market equilibrium and supply and demand and develops the analysis from both process-based and outcome-based perspectives.Along the path of problem formulation,problem analysis and problem-solving,this paper asks and answers the following key questions: What is the integration of the egg market in China and what are the economic mechanisms that govern the price transmission between the two main markets without a direct supply-demand relationship? What are the mechanisms that influence the formation of egg prices in the direction of the industry chain? Do substitute products have an impact on the formation of egg prices? How can patterns of egg price volatility be identified across regions? This paper summarizes the main research and findings through a combination of theoretical analysis and empirical testing as follows:First,the industrial layout and market structure are the fundamental reasons for the asymmetric transmission of egg prices between Shanghai and Beijing.Our study identifies the economic mechanisms that dominate the price transmission between the main egg markets without direct supply-demand linkages by selecting Shanghai and Beijing,the two largest egg markets in China,as the subjects of the study.After theoretically analyzing the market mechanism and presenting research hypotheses,our study empirically tests the mechanism’s dominance over the price transmission patterns between two main egg markets in conjunction with a Threshold Vector Error Correction Model(TVECM).The study found an asymmetry in egg price transmission between Shanghai and Beijing,and the root cause of this phenomenon is the market structure and industrial distribution.There is a significant threshold effect for egg price transmission between the two regions,with a threshold value of 0.14.The egg market is integrated within and outside the threshold,with a stable long-term cointegration relationship,and the number of observations within the threshold is almost four times larger than the number of observations outside the threshold.Within the threshold,the price deviation is relatively small and the speed of correction is relatively slow.The rise in Shanghai egg prices will not necessarily lead to a significant rise in Beijing egg prices,as Beijing has a monopoly on the supply of eggs in the North market;while the rise in Beijing egg prices will definitely lead to a significant rise in Shanghai prices,as Shanghai has no remaining egg supply market and shares the same egg supply market as Beijing.Outside the threshold,Shanghai and Beijing egg prices deviate relatively more and correct faster,almost twice the speed of correction within the threshold.At this point,an increase in egg prices in either Shanghai or Beijing will significantly lead to a significant increase in egg prices in the other city,and the egg markets in Shanghai and Beijing are fully integrated,and Beijing no longer has a monopoly on the North egg supply market,as the price differential is high enough to compensate for the North market supplying Shanghai,and prices are fully integrated when both Shanghai and Beijing share egg supply from both markets.Second,along the industry chain,feed prices are the Granger cause of egg price dynamics and the price of alternative production chicken meat has a significant impact on egg prices.This study examines the price transmission between upstream feed grain prices and downstream egg prices by selecting corn and soybean meal as representatives of the main components of egg feed and also examines the effect of alternative output chicken meat on egg prices.Based on the analysis of the vertical price transmission mechanism,this study examines the vertical price transmission relationship along the chain using the vector error correction model(VECM)and the surplus-lag Granger causality test.It is found that the prices of maize,soybean meal,and eggs are integrated and there is a long-run cointegration relationship.When prices move out of long-run equilibrium,the egg and maize markets are primarily responsible for price adjustments to equilibrium again,with the egg market taking approximately three and a half months to bring the price relationship back to long-run equilibrium again,taking a similar amount of time to the egg production cycle.The surplus-lagged Granger causality tests show that the price of maize is the Granger cause of egg prices,while the price of soybean meal is causal in both directions,indicating that feed costs play a key role in egg price formation;the test also shows that the price of chicken is the Granger cause of egg prices,indicating that both feed and substitutes influence egg price formation and fluctuations;the test also shows that the price of soybean meal is the Granger cause of the price of maize,indicating that the price of soybean meal,which carries information from the international market,has an impact on the domestic price of maize.From a policy perspective,therefore,a regulatory policy to stabilize egg prices should focus not only on the price of eggs markets,but also on feed prices and the prices of substitutes represented by chicken meat,so as to ensure egg price stability and safeguard the security and stability of the industrial chain.Third,the patterns of egg price fluctuations in China could be divided into three clusters,with variables related to egg production being an important economic factor influencing the clustering.In this study,we use an unsupervised machine learning approach based on cluster analysis to identify the patterns of egg price data fluctuations in each province of the country by using the DTW(Dynamic Time Warping)algorithm and combining it with the multinomial logit econometric model to analyze the economic factors determining the clustering results.We find that the patterns of egg price fluctuations across the country could be clustered into three clusters: the first cluster includes 12 provinces(cities)including Beijing,Tianjin,and Hebei,the second cluster includes 2 provinces(Anhui and Hubei),and the third cluster includes 16provinces(cities)including Inner Mongolia,Shanghai,and Zhejiang.Geographically,the provinces(cities)within each cluster show geographically contiguous characteristics.The first cluster overlaps with most of the egg-producing provinces and is located in the central hinterland location,the second cluster is in a position adjacent to the first cluster,and the third cluster is located on the periphery of the egg-producing provinces,which are the main egg importers.In terms of price fluctuation patterns,the first cluster of prices shows a moderate level of volatility,the second cluster shows prominent very high and very low values compared to the other two clusters,and the third cluster shows relatively low volatility characteristics and significantly less frequent occurrence of extreme values.The share of agricultural GDP,whether it is a major egg-producing province,and(per capita)egg production are important economic factors in determining the grouping.This study combines theoretical analysis and empirical testing of price formation and price transmission mechanisms to analyze in depth the price formation and price transmission mechanism of eggs in China,with the following innovations:(1)In terms of research content,first,this study answers the question of what is the mechanism of price transmission between markets without direct commodity trade by selecting two industry chain peer markets(two main sales markets)that have no direct supply-demand relationship with each other as the object of study.Through the analysis of theoretical mechanisms and empirical tests,this study points out that market structure and industry layout are the underlying causes of asymmetric spatial price transmission.Complementing the more intuitive arbitrage economic mechanisms found in previous studies by selecting markets up and down the industry chain or markets where direct supply and demand relationships exist,such as international and domestic markets connected by import and export trade,as the object of study(the main production market dominating price changes in the main sales market,or the main sales market dominating price changes in the main production market,or the international market dominating price changes in the domestic market).Second,based on studies of vertical price transmission along the chain,which have not yet reached uniform conclusions,this study further analyses and examines the transmission mechanisms regarding feed prices and egg prices,and also examines the role of substitute chicken prices in the formation and transmission of egg prices.(2)In terms of research perspective,this study analyses the intrinsic economic mechanism of price transmission from the perspective of building a unified domestic market,accelerating spatial market integration,enhancing the resilience of the industrial chain and improving market efficiency,and comprehensively examines the economic factors affecting egg price formation and price transmission,reflecting the key issues in building a unified domestic market.(3)In terms of research methodology,first,this paper uses an unsupervised machine learning approach to cluster analysis of dynamic time series.Specifically,the DTW algorithm is used to take full account of the dynamic characteristics of price time series,by identifying price heterogeneity between provinces(cities)so that provinces(cities)with similar volatility patterns are clustered into groups,and the clustering results further validate the theory of price formation and transmission.Second,this paper adopts the surplus-lagged Granger causality test,compared with the traditional Granger causality test with more prerequisite use conditions,this method has fewer prerequisite assumptions,which makes up for the shortcomings of the traditional Granger causality test that is sensitive to data stationarity and extends the scope of application of the Granger causality test,regardless of whether the data is stationary and whether there are structural points,it is applicable to the surplus-lagged Granger causality test,and the method shows more robust and reliable results.Third,the paper uses high-frequency daily observations to continuously reflect the market dynamics during the price adjustment process and to capture the market price adjustment mechanism comprehensively.At the same time,the paper constructs monthly,weekly,and daily multi-level research data to investigate the egg price formation and transmission mechanism in a multi-dimensional manner.This study proposes the following policy recommendations based on our findings: first,improve infrastructure construction,enhance connectivity between markets,accelerate the flow of factors and information between markets by lowering the threshold for transactions between markets,and promote the construction of a large domestic unified market from a fundamental mechanism by starting with the market structure and industrial layout.Second,strengthening the connection between upstream and downstream links in the industrial chain,attaching importance to the construction of market functions and market mechanisms,effectively promoting the circulation between factor and product markets,and making full use of the prominent role of market mechanisms in the optimal allocation of resources.Moreover,the implementation of target policies for price intervention should take into account,in addition to the target commodity,the prices of horizontal spatially homogeneous commodities linked to it,vertical upstream and downstream commodities in the industry chain,as well as alternative substitute commodities.It should also strengthen the early warning mechanism for egg market prices and develop a variety of tools to keep track of price changes.A multi-regional and multi-sectoral information-sharing platform on market dynamics will gradually be formed to effectively facilitate the flow of information between markets,ensuring that producers,consumers,and policy makers have accurate market information and are psychologically and operationally prepared for price changes.Finally,multiple initiatives will be taken to improve the market mechanism to ensure the stability of egg prices in China. |
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