Since September 2018 the average price per kilogram of mutton in Ulaanbaatar has increased by 35% (beef increased 26%). News outlets have been buzzing with talk of these price increases and even meat shortages. Headlines from many news outlets make it seem as if the sky is falling (see below for a particularly sensational headline from Ikon.mn). I hope to explain the market forces at play here and hopefully better understand why prices are at record highs.

How Meat Works in Mongolia
In Mongolia, meat prices are highly seasonal, with meat prices rising in the Spring and then falling in the Fall. The meat supply itself comes from nomadic herders who make up roughly 30% of the population. But these herders do not operate with anything resembling a western mode of production. Their behavior has more to do with herd health and preparations for the various challenges of each season.

“The price of meat is skyrocketing and there is a shortage!”
Here is a rough generalization of the behavior of herders. This, of course, does not speak for all herders but from what I have observed this is relatively typical behavior. In the Fall before winter sets in herders will slaughter or sell those animals which are likely to die in the coming winter. Then in the Spring during breeding season herders often restrict the amount they sell so as not to limit their potential growth that year. In the Summer the productive animals are known and herders are more willing to sell or slaughter those animals that are not pregnant.

With this cycle, it is clear that seasonal prices are primarily being driven by the supply of meat. Prices go down in the Fall, hit the bottom in the Winter, and then rise dramatically in the Spring, reaching the peak in the Summer.

To ensure the supply of meat, the government purchases extra meat when prices are generally low and freeze it for use in times when supply is lower. This program has been going on for several years and the Minister of Food, Agriculture, and Light Industry recently stated they will increase the supply of this reserve meat on the market. However, based on available data it is not clear whether this program actually works or does not. This reserve meat is frozen for several months and, from what I have observed, is much less desirable in the market.

Are increasing exports causing record prices?

Now that we have a short introduction to how the market works in Mongolia, let’s take a look at the factor most are blaming for the price increases, exports. Recently I was interview on MNB World’s weekly news program. Through this, I learned of the concern that international traders (particularly from China) are being blamed for buying meat in bulk, thus causing a meat shortage and prices to rise.

To understand this better I wanted to see if meat prices correlated with exports. After all, meat exports are not a new thing in Mongolia. If these exports were causing a fluctuation in the price of meat we should see these correlations. So let’s take a look!

Please review the full article with graphics at https://medium.com/…/mongolian-meat-price-time-series-forec…

BY: Robert Ritz

Published Date:2019-05-20