The general population's price perception index may differ from the market price index depending on income levels, psychologic impact from price fluctuations (of representative․popular items), and seasonal changes. This study was conducted to evaluate the impact of agricultural price fluctuations on general market prices, and to deduce a method of prioritizing price control targets of individual agricultural items by reflecting the general population's sentiment about price levels.
There are specific purposes in this study: 1) to evaluate the degree of agricultural price fluctuations' impact on general price fluctuations, 2) to index the priorities of price control items in consideration of the factors, such as purchase frequency and income levels, that influence the consumer price sentiment, and 3) to propose a method of categorizing and selecting target items for reasonable price management based on various criteria.
Contribution analysis, regression analysis and inter-industry analysis were used to evaluate the impact of agricultural prices on the general market price levels. A consumer survey was conducted among 616 households in major cities to determine the consumer sentiment and perception of agricultural prices. Five indexes were developed to reflect the consumer sentiment, and the prioritized agricultural items were assessed using each index. The five indexes were standardized and composite scores of the items were deduced based on three scenarios to determine the order of priority of the price control items.
Crops and livestock products have shown more price fluctuations than prices in other industries. Crop and livestock product prices show distinct fluctuations due to seasonal changes: the prices are low in summer and high in winter, and the price volatility increases in February and October and decreases in June. The seasonality of agricultural products' price levels and volatility is more apparent in vegetables and fruits than in grains and livestock products.
The consumer price levels have increased by an annual average of 3.2% from the year 2000 to 2012. The degrees of impact that have contributed to the increase in consumer price levels were identified by individual product categories and industry types. These are (in the order of impact) personalized services, industrial products, education, transportation, agricultural and fishery products, public services, house rent, and healthcare. The impact of agricultural and fishery prices on price inflation was not large, contrary to the general perception as seen in consumer surveys. The impact of increase in agricultural and fishery prices on other industries was also minimal. An inter-industry input-output model showed that the impact of a 10% increase in agricultural and fishery prices on the pricing (cost) of other industries was only 0.16% (An analysis using the time series model also showed a small estimate value of 0.06%).
The categories consumers think of as having a large impact on price fluctuation were in the order of agricultural and fishery products, utility prices and education cost. The reason why consumers are sensitive about agricultural and fishery price fluctuations is thought to lie on high purchase frequencies, since 60.8% of surveyed consumers answered that their purchase frequency is high and 30.1% said that the spending proportion of agricultural and fishery products in household expenditure is high. Consumers also answered that in establishing government policies for price control of agricultural products, price volatility of individual items, proportion in household expenditure, and purchase frequency must be considered foremost.
From the above data, it may be concluded that agricultural and fishery prices do not have a large impact on general consumer price levels, but due to its influence on the consumer price sentiment, it may distort the economic activity of consumers.
To reflect the factors that influence the consumer price sentiment, five indexes are selected and these are 'proportion of average expenditure', 'purchase frequency', 'proportion of expenditure in the two lowest income brackets,' 'price volatility', and 'impact on pricing in other industries'. Using these 5 indexes, price control targets were prioritized comprehensively. According to the simple average of the 5 indexes, annual priorities were in the order of pork, beef, milk, rice, napa cabbages, spring onions, tangerines, apples and powdered red pepper. But if we take the results of consumer surveys into account and assign a dual weighted value to the indexes of proportion of average expenditure, purchase frequency and price volatility, the weighted priority average of the items were in the order of pork, milk, beef, rice, spring onions, napa cabbages, white radishes, tangerines, apples and red pepper. There were no significant difference between the order of items by the simple average and the weighted average except for the red pepper.
The seasonal priority items for price control were in the order of pork, milk, beef, rice, onions, eggs, spring onions, strawberries, carrots and cucumbers in spring, pork, milk, beef, rice, watermelons, white radishes, garlic, cabbages, eggs and tomatoes in summer, pork, beef, milk, rice, powdered red pepper, lettuces, napa cabbages, pumpkins, apples and tangerines in autumn, and pork, beef, milk, tangerines, rice, apples, eggs, white cabbages and lettuces in winter. Pork, beef, milk, rice and eggs were selected regardless of the season, but seasonal differences were seen on seasonal items such as fruits and vegetables: onions, spring onions, strawberries, carrots and cucumbers in spring; watermelons, white radishes, garlic, cabbages and tomatoes in summer; powdered red pepper, lettuces, napa cabbages, pumpkins, apples and tangerines in autumn; and tangerines, apples, white radishes and lettuces in winter. If the annual order of priority and the seasonal order of priority are taken into account together, the control target priority can change depending on the season. For example, napa cabbage is an important item in the annual priority as it is ranked in the 5th place, but in the seasonal priority it takes only the 10th place in autumn and 20th place in summer. The priority levels of price control targets showed significant seasonal variations in items such as vegetables, including napa cabbages, and fruits. In the price control of agricultural products, taking into account not only the annual priority levels but also the seasonal priority levels may improve the effect of the price control system.