Recently, the prices of major agricultural products have risen again. This has triggered the attention of the government, consumers and investors. Although from a policy perspective, in the short term, the government's stockpiling behavior can temporarily relieve upward pressure, but from a longer period of time, the rise in agricultural product prices has a deeper level. This can be summed up in two aspects: First, national governments implement loose monetary policies, excess liquidity will inevitably push asset prices to re-evaluate. On the other hand, current supply and demand of agricultural products are generally balanced. Any excess demand and supply data will trigger a strong market response.

At present, the economic conditions of the world's major economies are not optimistic. Although most market analysts believe that the economy does not have the worry of bottoming out, all economic indicators do not perform well. This makes central banks all choose to continue to implement loose monetary policies. To stabilize economic growth.

Loose monetary policy

Raise commodity prices

As the United States, the world’s number one economy, its economic growth performance and its driving effect cannot be ignored. However, the non-agricultural employment population in the United States fell by 95,000 in September, worse than expected. At the same time, the unemployment rate remained at a high of 9.6%. The two sets of data show that the U.S. job market has not seen any significant improvement and the economic recovery is still lacking momentum. The market expects the Fed to further relax its monetary policy. Correspondingly, Fed Chairman Berknan publicly stated that further purchases of assets could boost the U.S. economy. More aggressive predictions (such as Goldman Sachs) estimate that the Fed will not raise interest rates during the year, and will not raise interest rates even in 2011, at least until 2012 or even 2013 will be possible to raise interest rates.

Other central banks are also implementing similar loose monetary policies. The Bank of Japan lowered the interest rate on the 5th of this month, and cut the interbank unsecured overnight dismantling interest rate from 0.1% to 0.1%. This is the fourth consecutive year that the Bank of Japan implemented the zero interest rate policy again. The European Central Bank and the Bank of England also maintained the current low interest rate level at the recent interest rate meeting.

At present, the hidden fear of excess liquidity has already appeared. A large number of funds have entered the market and will continue to push up the price range of assets. The general rise in commodity prices is the result of this macroeconomic background. If the United States starts its quantitative easing monetary policy again in November, it will inevitably boost the revaluation of commodity prices, and the history of the previous round of price increases will repeat itself.

Crop production is expected to be lowered

Triggering market boom

Due to the impact of industrialization, the abnormal climate in the world is frequent, and the arable land and fresh water supply required by agricultural products are also declining, which restricts the growth of agricultural product supply. Coupled with the ever-increasing world population, the rigid food demand is high, and the food supply balance is rather fragile. With a slight sign of trouble, the price has gone all the way.

According to the latest report from the US Department of Agriculture, U.S. corn production was downgraded to 155.8 bushels per acre, well below the previous forecast of 162.5 bushels per acre and analyst estimates of 159.9 bushels per acre. At the same time, the final production of corn was forecast to reach 12.664 billion bushels, a decrease of nearly 4% from the previous month's forecast. Although the U.S. Department of Agriculture estimated that soybean production reached a record high of 3.408 billion bushels and the yield was at a record high of 44.4 bushels per acre, both figures were below the market's expected 3.491 billion bushels and 45.0 bushels/acre. At the same time, the 2010/2011 soybean carryover inventory is estimated to be lower than market expectations. In addition, the global wheat production forecast and the global wheat carryover inventory estimate are also lowered.

The above data released by the U.S. Department of Agriculture triggered concerns in the market that CBOT's corn, soybeans, and wheat all had a daily limit on Friday. Since the United States is the main producer and exporter of the aforementioned agricultural products, combined with CBOT's position as the authoritative agricultural product futures exchange, the United States has an international agricultural product pricing power. Although China is a traditional agricultural country, due to its large population, many agricultural products rely on imports. This makes the price of agricultural products in China to a large extent follow the linkage of foreign prices. In other words, the high prices of international agricultural products will also push up the prices of agricultural products in China.