Price Asymmetry in the International Wheat Market

Most wheat exports are accounted for by a limited number of countries with different policy regimes and specializing, for the most part, in particular classes of wheat. Under these circumstances, there is likely to be considerable interaction among the major exporting countries in the determination of wheat prices. In this paper, price linkages between the U.S. and other exporting countries (Canada, the European Union, Argentina and Australia) in the world wheat market are investigated. After determining that the direction of causality is from U. S. prices to the prices of other exporting countries, the nature of the price linkages is studied. The results suggest that the major exporting countries respond asymmetrically to U.S. price changes. The degree of asymmetry differs from one exporting country to another, Argentina and the European Union show greater response to falling prices than to rising prices, while the opposite is true for Canada and Australia.     

A Price Analysis of U.S. Agricultural Exports in East Asian Markets

This paper examines the price competition between U.S. agricultural exports and that of its competitors in East Asia. The results show weak price competition in Japan's corn and soybean markets, and no price competition in the wheat market. U.S. cotton exports to Japan face strong price competition. In Hong Kong, U.S. market shares are low, while the demand for its rice, corn, soybeans and cotton is elastic. For South Korea and Taiwan, improved political relationships between China, South Korea, and Taiwan have caused the U.S. to lose market shares to China.     

Agricultural Trade among NAFTA Countries: A Case Study of U.S. Meat Exports

The U.S. NAFTA partners are important markets for U.S. meat exports. A source-differentiated almost ideal demand system is used in this study to estimate meat demand in Canada and Mexico. Empirical results suggest that while a U.S. price increase in the Canadian market is expected to increase U.S. sales revenues; it would decrease sales revenues in the Mexican market. Furthermore, an increase in meat expenditures in Canada and Mexico is expected to increase the demand for U.S. meats, while the bovine spongiform encephalopathy outbreaks have had a negative effect on U.S. and Canadian beef market shares. Finally, a decomposition of the causes of changes in demand for U.S. meats over time is performed.     

A Reexamination of Price Dynamics in the International Wheat Market

This paper examines price relationships in the international wheat market for the years 1981–93 using a cointegration and error correction approach. Price series are found to be first-differenced stationary and cointegrated. Our results provide evidence that the United States, Australia, the European Union and Argentina react to Canada's pricing decisions, whereas Canada does not respond to any other price changes except Australia's. Similarly, the United States also plays a strong role in the pricing of other exporters (except Canada) and its pricing decision is affected by changes in Canadian and Australian prices. The remaining exporters such as the European Union and Argentina respond to the U.S. and Canadian price changes but do not have any influence on other prices. Overall, our results suggest that there is no distinct price leader in the international wheat market. Nous examinons les rapports deprixjouantsur le marché international du blé durant la période 1981–1993, suivant une démarche de co-intégration et de correction des erreurs. Nous avons constaté et vérifié que les séries de prix se révélent stationnaires lorsqu‘exprimées en première différence et qu‘elles sont cointégrées. Nos observations démontrent que les États-Unis, I'Australie, I'Union européenne et I'Argentine réagissent aux décisions de tariflcation prises au Canada et que de son côté, le Canada ne réagit à aucun autre changement du régime de tarification sauf à celui de I'Australie. De même, les États-Unis jouent également un rôle important dans la tarification des autres exportateurs (le Canada excepté) et ses décisions de tarification sont sensibles aux changements affectant les prix canadiens et australiens. Le reste des exportateurs, notamment I'Union européenne et I'Argentine, sont en mesure de réagir aux changements des prix appliqués aux États- Unis et au Canada, mais Us n‘ont aucune influence sur la tarification des autres exportateurs. Toutes ces observations nous amènent à conclure qu'il n'y a pas vraiment de leader dans l'établissement des prix du blé sur le marché international.     

Impact of Environmental Policies in the Hog-Pork Sector on Trade and Market Welfare in North America

The objective of this study is to design a framework to assess trade patterns and market welfare (Marshallian measures of producer and consumer surpluses plus government payments) under various combinations of agricultural, environmental and trade policies. To reach this objective, an environmental model, EPIC, is linked to a model of the North American hog-pork sector. The reduction in Québec inventories, following the implementation of environmental policies, triggers a decrease of Canadian live hog exports to the U.S. and an increase of U.S. pork exports to Canada. Environmental policies are responsible for decreases in welfare. The decrease in welfare is the largest when a moratorium in North America is simulated. Since trade liberalization has a positive impact on welfare, the welfare decrease from a moratorium is somewhat attenuated under free trade conditions.     

Linking of U.S. monetary policy and exchange rates to world soybean markets

The linkage between macroeconomic policies and agricultural commodity trade has become an important research issue of agricultural economists. This paper investigates the macroeconomic linkage of soybean trade competition between the exporting countries of the United States, Brazil, and Argentina in the EC-12 and Japan import markets. It is argued that U.S. monetary growth may have important impacts on the competitive position of U.S. soybean exports through exchange rates. Two relationships are investigated: (a) the effects of U.S. monetary growth on the agricultural trade weighted exchange rates, and (b) the responsiveness of agricultural commodity prices and U.S. exports to exchange rate movements. Results indicate that a weak dollar increases imports of soybeans and soymeal significantly which serves to increase the equilibrium world price and increase both U.S. and Brazil/Argentina exports in the long run. However, during periods of more expansionary U.S. monetary policy there is little evidence of significant increases in market share position for U.S. soybeans and soymeal in world markets.     

Japan's peanut import demand: implications for United States exports

Japan's import demand for both raw peanuts and processed peanut products was estimated using the Rotterdam model in order to determine the impact of an increase in the Japanese raw peanut quota on peanut imports from the USA and its competitors. The results indicate that if a larger import budget were allocated to raw peanut imports by Japan, most of the increase would be allocated to imports of Chinese raw peanuts. Furthermore, U.S. exports of peanut products could be affected if Japanese expenditures on peanut product imports change as a result of an increase in the quota for raw peanut imports. Thus, this study concludes that an increase in the Japanese import quota for raw peanuts provides only limited market opportunity for U.S. peanut exports, and China appears to benefit more than the USA from an increase in the Japanese raw peanut import quota. In contrast, the value added trade of peanut products could provide a better market opportunity for the U.S. peanut industry.     

Black Sea and World Wheat Market Price Integration Analysis

In 2008–10, Russia and Ukraine together exported an average of 29 million tons of wheat per year, and have become important players in the international wheat market. This research summarizes the short‐ and long‐run wheat price dynamics between Ukraine and Russia, and other major wheat exporters—the United States, European Union (EU), and Canada—from 2004 to 2010. Tests of market price co‐integration (Johansen maximum likelihood test and residual‐based tests) as well as threshold error correction techniques were performed for this purpose. The results suggest that Russian wheat prices were co‐integrated with EU and U.S. wheat prices but not with Canadian wheat prices. Ukrainian wheat prices were found to be co‐integrated with French wheat prices only. The estimated long‐run wheat price transmission elasticities were estimated to be equal to 1.04 between Russian and French (a representative country of the EU) wheat prices, 1.16 between Russian and U.S. wheat prices, and 1.05 between Ukrainian and French wheat prices. We also found the short‐term relationships between the co‐integrated series to be statistically significant. Price adjustments in all co‐integrated prices were found to be symmetric.     

Grades/Classes of Hard Wheats Exported from North America: Analysis of Growth and Market Segments

Issues about grain quality are integral to export demand and competition. In the past, debate focused on wheat class and country of origin. This study analyzed changes in imports for wheat grades and classes for hard wheats in Canada and the United States. Clustering techniques were utilized to examine importer behavior and identify market segments for characteristics of U.S. wheats over time. Shifts in marketing toward shipment of specific classes and from lower to higher grades were identified. Cluster analysis indicated changes in composition and an increase in the number of market segments.     

A Spatial Equilibrium Analysis of U.S.–Canadian Disputes on the World Softwood Lumber Market

This paper utilizes a world spatial equilibrium model to examine the effects of U.S.–Canadian softwood lumber disputes on U.S., Canadian, and other exporters' and importers' lumber markets. Results show that the U.S. import tariff on Canadian softwood lumber impacts prices, supply, demand and trade flows not only in the United States and Canada but also in the other countries. Though the goal of U.S. trade restriction is to limit imports from Canada and protect its producers, the United States cannot fully accomplish this goal as non-Canadian exporters fill the void left by the reduced imports from Canada. Canadian producers lose from the U.S. policy, but their loss is mitigated as Canada redirects its exports to other importers. Importing countries such as Japan and the European Union benefit from the U.S. trade restrictions as Canada seeks to sell its softwood lumber to these countries.     

Hedonic Price Functions for Wheat in the World Market: Implications for Canadian Wheat Export Strategy

This study derives econometric estimates of the marginal implicit values of major characteristics of wheat in world markets for two recent time periods using pooled time-series and cross-sectional data. The results indicate that a one percentage point increase in protein content was associated with an average 0.3% price premium from 1976–77 to 1979–80. This price response had increased to an average 0.5% premium from 1980–81 to 1983–84, when there was an average world market protein premium of about U.S. $6.00 for a one percentage point increase in protein per tonne of wheat. During the latter time period, there was a premium for white wheat of nearly U.S. $16 per tonne. Wheat exported from the United States and Canada appeared to be discounted in price relative to wheat from Australia. Given the general order of the inverse relationship between yield and protein content that applies in wheat breeding, it is apparent that total revenue from Canadian wheat exports could be considerably increased by more emphasis on the development of higher-yielding wheats that are adapted to the higher-moisture regions of the Prairies. More emphasis on development of white wheats that are suited to Prairie growing conditions is also merited. La présente étude vise à obtenir des estimations économétriques à partir de valeurs marginales implicites des caractéristiques principales du blé sur les marchés mondiaux pour deux périodes de temps récentes, à l'aide de séries chronologiques regroupées et de données transversales. Les résultats obtenus montrent qu'une augmentation de un pour cent de la teneur en protéines correspond en moyenne à une bonification de 0,3% de 1976–1977 à 1979–1980. Cette réaction des prix a atteint en moyenne 0,5% de 1980–1981 a 1983–1984, alors qu'une augmentation de un pour cent de la teneur en protéines par tonne de blé donnait lieu à une bonification moyenne, sur les marchés mondiaux, d'environ 6 $ US. Pendant la dernière période, le blé blanc faisait l'objet d'une bonification de près de 16 $ US par tonne. Le blé exporté des États-Unis et du Canada semble avoir été vendu à rabais, comparativement au blé venant d'Australie. Compte tenu du rapport inverse généralement observé entre le rendement et la teneur en protéines dans un contexte de sélection végétale, il semble que le total des revenus tirés des exportations canadiennes de blé pourrait s'accroître considérablement si l'on mettait davantage l'accent sur la production de variétés à rendement plus élevé, adaptées aux régions à haut taux d'humidité des Prairies. II serait également justifié de consacrer davantage d'énergie à la production de blés blancs mieux adaptés aux conditions de croissance des Prairies.     

Imports versus Domestic Production: A Demand System Analysis of the U.S. Red Wine Market

The U.S. wine market experienced rapid growth in all facets—production, consumption, exports, and imports—over the past decade. Red wine imports more than tripled while consumption of domestically produced red wines doubled. This research estimates demand elasticities of U.S. red wine imports from five countries accounting for over 90% of imports—Italy, France, Spain, Australia, and Chile—using the first-difference version of the almost ideal demand system (AIDS). These elasticities are compared with those for domestically produced red wine. Results for conditional expenditure elasticities indicate that the U.S. red wine industry gains over imports when U.S. consumers' total expenditures on red wine increase. However, comparing own- and cross-price elasticities reveals an increase in the price of U.S. red wine results in a decline in quantity demanded six times greater than for French and Italian red wines and over 20 times greater than other import countries, thus harming the U.S. red wine industry. Empirical results suggest that U.S. red-wine producers could increase their total revenue by decreasing prices, while Italian and French producers can increase total revenues by increasing them.     

Canadian Exports of Livestock and Meat to the United States

Canadian exports of beef and live cattle to the United States have increased significantly since the late 1980s. Hog and pork exports have increased since the mid-1990s. Major factors affecting exports of beef, pork, cattle and hogs from Canada to the United States include the exchange rate, increased Canadian production, Canada-U.S. price differentials and trade liberalization under the Canada-United States Free Trade Agreement of 1989. Increased Canadian exports have resulted in small but significant reductions in U.S. domestic prices of beef, pork and hogs.     

Biases in Calculating Dumping Margins: The Case of Cyclical Products

A dumping investigation involves comparing export prices with a "normal value" loosely defined as the price in the exporter's domestic market observed in the course of normal trade. However, domestic sales with prices below production costs are excluded from the computation of a normal value. The paper illustrates how price cycles affect the magnitude of estimated dumping margins. The empirical analysis focuses on Canadian hog exports to the United States and U.S. potato exports to Canada. The estimated period and amplitude of each price cycles result in average dumping margins for Canadian hogs and U.S. potato exports of 11.5% and 5.9%, respectively. Biases in dumping margins depend on the nature of the cycle, the period of investigation, and the average production cost estimate.     

Effects of Bovine Spongiform Encephalopathy Outbreaks on U.S. Cattle and Beef Prices

U.S. trade of beef and live cattle declined substantially after the discoveries of bovine spongiform encephalopathy (BSE) in Canada and the United States in 2003. In this study, an econometric model is developed to estimate the effects of lifting trade restrictions on U.S. cattle and beef prices. Results show that increases in imports of Canadian cattle and beef would lower prices of slaughter steers, feeder steers, and retail beef, but these negative impacts would be more than negated by the positive effects on prices that would result if beef exports return to near pre-BSE levels.     

Price Discrimination in the Context of Vertical Differentiation: An Application to Canadian Wheat Exports

The ability of the Canadian Wheat Board (CWB) to price discriminate in wheat exports is examined. The conceptual model shows that the CWB's ability to exploit cost differences in pricing depends on the extent of differentiation between Canadian and U.S. wheat. This model is implemented using monthly confidential price data for exports to four markets from 1982 to 1994. The empirical results support the conclusions that (1) the CWB has market power emerging from product differentiation, (2) the CWB price discriminates across export markets, and (3) Alchian–Allen effects are important in pricing in markets valuing quality such as Japan and the United Kingdom.     

Tariff quota administration in China's grain markets: An empirical assessment

In 2016, the U.S. launched a trade dispute against China at the World Trade Organization, arguing that China has been restricting its grain imports via tariff quota administration. Despite sharp criticisms by the U.S., the extent to which the grain imports were restricted in China remains largely unknown, primarily due to that China's grain import behaviors are still under-researched. The U.S. grain export sector might actually gain little from China's grain trade liberalization in the short run, since China has become less import dependent on the U.S. through the pursuit of import diversification. In this context, this article aims to quantify impacts of the tariff quota administration on China's grain imports from its trading partners. We calculate ad valorem tariff equivalents of the tariff quota administration and then estimate import demand elasticities using a source differentiated import demand model. We find that the tariff quota administration might have reduced China's quota fill rates for the grain commodities by 10–35% during 2013–2017. In particular, the U.S. wheat exports to China were largely negatively affected. We also find that the tariff quota administration in China acts like a variable import levy—its import restrictiveness varies negatively with world prices, leading to lower import demand elasticities.     

Canada's beef exports: Border effects and prospects for market access

This paper examines the magnitudes of border effects on Canada's beef exports, and assesses the prospects for market access. The empirical analysis relies on a gravity model derived from a supply-based framework, and implements different econometric methodologies. It covers the conventional measurement of border effects that is determined relative to the intranational trade baseline. Also, it sets alternative baselines to estimate the wedge between the border effects on beef exports of Canada and those of other countries. The estimated parameters are used to carry out different scenarios to examine the tariff-related and nontariff border effects, and to evaluate the impacts of trade preferences for Canada's bilateral beef exports. The results reveal significant trade impediments facing Canada's bilateral beef exports to many large markets (e.g., EU-15, Japan, Republic of Korea, China, and Russia), and they often indicate that the effects of tariff reductions become considerably larger when coupled with reductions in nontariff impediments. Also, they underscore the significance of North American Free Trade Agreement (NAFTA)’s preferential market access for Canada's beef exports. The export opportunities for the Canadian beef industry that are generated through lower trade barriers would, however, decrease when trade barriers facing other beef-exporting countries are reduced.     

An econometric analysis of U.S. vital wheat gluten imports

In light of the wheat wet milling industry's development in the E.C. and of the prominent role U.S imports play in the international market for wheat gluten, this paper discusses the international market for wheat gluten, an important component of processed grain products. An econometric analysis of the U.S. import demand for wheat gluten is undertaken. The price of flour, income, and the U.S. value of wheat protein are found to be important determinants of wheat gluten imports.     

Substitution between U.S. and Canadian Wheat by Class

The imports of hard red winter and durum wheat from Canada has been a source of contention among U.S. wheat growers, due to the likeness between domestic and imported Canadian wheat. This has also been investigated as a source of material injury to the U.S. market. We examine the relative substitution between U.S. and Canadian wheat, by class, by treating wheat as an input in flour production. We find that while U.S. hard red spring wheat and U.S. hard red winter wheat are economic substitutes, there is limited price substitution between U.S. and Canadian durum and U.S. and Canadian hard red spring wheat. Quality differences from the millers’ perspective may be the reason driving the import demand for hard red spring and durum wheat from Canada. Les importations de blé de force rouge d'hiver et de blé dur en provenance du Canada sont une source de conflit chez les producteurs de blé des États‐Unis, en raison de la ressemblance entre le blé produit aux États‐Unis et le blé importé du Canada. Ce point, jugé comme une source de préjudice important au marchéétatsunien, a également fait l'objet d'une enquête. Nous avons examiné la substitution relative du bléétatsunien et canadien, selon la classe, en traitant le blé comme un intrant dans la production de farine. Nos résultats ont indiqué que, bien que le blé de force roux de printemps et le blé de force rouge d'hiver soient des substituts économiques, la substitution en raison du prix demeure limitée entre le blé dur étatsunien et canadien et entre le blé de force roux de printemps étatsunien et canadien. Les différences de qualité perçues par les meuniers pourraient être la raison qui stimule la demande d'importation de blé de force roux du printemps et de blé dur en provenance du Canada.