The Risk Of The Market Process Of Supply Of Agricultural Products In Zhejiang Province Reaction

With deepening of agricultural market reform, the environment for agricultural production in China has been greatly changed. Agricultural risk has been more complicated. It is of theoretical and practical significance for risk management of farmers and policy makers to estimate farming risk and to explore its effect on agricultural supply.The paper first discusses the formation mechanisms of agricultural risk and its possible impacts on farmers' income after a detailed literature review. Second, product-specific agricultural risk degree and the supply response to risks in Zhjiang are estimated by quantitative methods, in which six important products including early rice, late rice, wheat, rapeseed, cotton and pork are selected. The empirical analysis is based on the time-serial data from "Zhejiang Province Cost Survey Data for Agricultural Products". Finally, some implications and policy suggestions for agricultural risk management both at the micro- and macro-level are made.Based on estimating by "fixed-weight moving average method" and risk correlation analysis, it has been showed the farming risk degree for the six selected products change greatly in the investigated period. Moreover, the risk level has an increasing tendency since 1980. However, the risk level is also to be product-specific. For the products such as early rice, late rice, cotton and pork, the increasing price risk is the main risk factor, whereas the risk of wheat and rapeseed are mainly influenced by natural factors. With the improvement of agricultural production condition and the market-oriented reform of agricultural policy, it could be most possible that price fluctuations in future will be the most important risk source for agricultural production in Zhejiang.The empirical estimation of product-specific supply response to risk, which is based on price expectation model, shows there is a negative correlation between risk and agricultural supply. This means that the risk factor has a negative effect on agricultural production in the process of agricultural reform. Moreover, the low statistical significance for the econometric functions implies that small farm size, low marketed share and farmer income diversification in Zhejiang have reduced farmer's supply response to risk.Based on the empirical results above, the following points are very important for risk management in agriculture. At the farm level, enhancing farmer's education, suitably increasing information collection cost, restructuring farming organizations, taking part in the activities of agricultural integration as well as hedging with contract are all good strategies to decrease agricultural risk and thereby improve risk decision efficiency. As to government, setting up special agencies on agricultural risk research to provide information service for farmers, improving agricultural protecting price system, developing agricultural commodity future market and perfecting agricultural insurance system are effective policies to reduce and hedge risk.