If the price of early rice in the market is cancelled, it is possible for corn to fall back 10 years ago.

Recently, some experts have suggested abolishing the minimum purchase price of wheat and rice. Considering that the temporary corn purchase and storage policy was cancelled in 2016, the cancellation of the minimum purchase price policy for wheat and rice is also to be expected, and the key is when to cancel it.

Let's just talk about the situation of rice. If the trust is cancelled, how much will the price of rice fall? In fact, corn is a good reference.

After the temporary storage was cancelled, the market price of corn dropped directly from 2400 yuan / ton to 1400 yuan / ton, a drop of 1000 yuan per ton, which can be said to be falling off a cliff. So if the minimum purchase price of rice is cancelled, how much will the market price fall?

At present, the sales price of early indica rice, the lowest national purchase price in 2016, is about 3000 yuan / ton, while the sales price of the local reserve of early indica rice in Guangdong (agricultural land, commercial and residential land, industrial land) in South China Grain Trading Center is about 2100 yuan / ton. Which is closer to the market price? It should be the latter, because the transaction rate of the latter is higher, above 90%, while that of the former is only 7%. And from another point of view, if 3000 yuan / ton is the market price of old rice in the producing area, then enterprises in Guangdong buy old rice at a price of 2100 yuan / ton from the South China Grain Exchange Center, and they can immediately sell it to the producing area at a price of 3000 yuan / ton. After deducting the intermediate cost, the net profit per ton is at least 700yuan, which is completely risk-free arbitrage. We know that the opportunity for risk-free arbitrage can only exist in the short term, not in the long run (because risk-free arbitrage quickly erases spreads), but such spreads have been around for several years. This can only show that the price of 3000 yuan per ton is a "fake" market price, a price forcibly raised by the government, and there is no basis for existence-that is to say, there are not many actual transactions taking place at this price.

This also means that if the rice transaction price of the South China Grain Exchange Center is taken as the benchmark, after the support of the market is cancelled, the market price of early rice will fall by at least 700 yuan / ton. In fact, due to the knock-on effect of the cancellation of the market price, the market price of early rice is likely to fall by 1000 yuan / ton, that is, by 50 cents per jin.

Why do you say that?

Because although the market supports new rice, due to the existence of substitution effect, the price of old rice will also be held up indirectly, which is not completely market-oriented. If the minimum purchase price is completely removed, the market price of old rice must be lower than the current one. I have reserved 300 yuan / ton for this.

The reserved space of 300 yuan per ton is simulated with reference to the price decline of corn after the lifting of the market support. Is it more? Not much, actually. Because the market support policy of wheat and rice was not cancelled when corn was abolished, and also due to the substitution effect, the market support policy of wheat and rice still gave indirect support to corn after the cancellation of corn market support. So that the decline will not be too big. However, if only the support of wheat is left after the cancellation of rice, or even the policy of supporting the market of wheat is likely to be cancelled, then the price of early rice may fall even more than when corn is cancelled.

As for the middle and late indica rice, due to the lack of market support, the price decline will be much smaller after the cancellation of the market support. However, in recent years, japonica rice has been heavily dependent on supporting the market, and once the policy of supporting the market is abolished, the price will also avalanche. As for the number of collapses, interested people can simulate and calculate according to the above ideas.

After the temporary storage of corn was cancelled, the price of corn fell directly to the 2006 level. If the price of early rice falls by 1000 yuan / ton, it is entirely possible that the price of early rice will fall to the level of 2008 and 2009.