FTA,Exchange rate pass‐through and export price behavior – Lessons from the Australian dairy sector

The growing number of bilateral and regional free trade agreements (FTAs) alongside exchange rate volatility has raised a question on whether these affect exporters’ pricing behaviors, hence competitiveness. This study contributes to this topic by examining Australian dairy export price behavior across eight major markets taking into account the extent of pass‐through of exchange rate and tariff as well as FTAs between Australia and its trading partners. Commodity‐level dairy trade data from 1996 to 2016 and the feasible generalized least squares methods are employed. The study finds incomplete pass‐through at the industry level. The dairy export prices decrease by 1.7% if Australian dollar depreciates by 10%, while 10% tariff reduction is associated with 0.7% export price cut. Results at the commodity level show different pricing behaviors across destination and commodity markets. Overall, apart from the tariff effects, there is minimal evidence of the impacts of FTAs on dairy export prices.     

Pricing‐To‐Market Analysis: The Case of EU Wheat Exports

The EU is a major player in the global wheat market. This paper examines the pricing behaviour of EU wheat exporters using a pricing‐to‐market (PTM) analysis. Wheat is an exemplary product for testing PTM theories as it is widely and frequently traded, and largely unbranded. We estimate the relationship between export unit values and exchange rates using quarterly panel data for 11 EU export destinations for 2000–2013. Results show that there is a meaningful long‐run relationship between export unit values and exchange rates, but there is little evidence of differential mark‐ups between EU export markets. Belarus and Iceland are exceptions where exporters from the EU appear to exercise local currency price stabilisation.     

Pricing to Market Behavior by Canadian and U.S. Agri-food Exporters: Evidence from Wheat, Pulse and Apples

A fixed-effects model to control for time variation in marginal costs is employed to pinpoint evidence of price discriminatory behavior of Canadian and U.S. exporters of agri-food products. We test for evidence of pricing to market behavior and whether price discrimination or commodity/country characteristics may provide a plausible explanation. A distinguishing feature of our approach is to examine the time-series properties of the data by the conventional augmented Dickey-Fuller and recently developed panel unit root test. The panel data set employed in this paper consists of annual exchange rates and export prices for three agri-food products (wheat, pulse and apples) exported by Canada and the U.S. in foreign markets during 1980–98. Our fixed-effects model suggests that U.S. exporters are sensitive to exchange rate changes, while Canadian exporters in most cases raised price markups in response to a depreciated currency in overseas markets. The results highlight the differences in pricing policy that both countries employ to merchandise agri-food products in export markets.     

Are Russian Wheat Exporters Able to Price Discriminate? Empirical Evidence from the Last Decade

Significant changes have taken place in the world wheat market in the last decade. Russia, a former net wheat importer, has become a leading exporter with a world market share of 11.2% in 2009. This increasing importance and the discussion about the establishment of a grain‐OPEC consisting of Ukraine, Kazakhstan and Russia has raised the issue of pricing behaviour of Russian wheat exporters. Although there are several studies on the pricing behaviour of Canadian and US wheat exporters, there is none so far for Russian wheat exporters. This study provides a quantitative analysis of the pricing behaviour of Russian wheat exporters, explicitly taking account of the export tax imposed between 2007 and 2008. We employ a pricing‐to‐market (PTM) model on quarterly Russian wheat‐export data, covering the period from 2002 to 2010 and 25 export destinations. Our findings indicate that (i) Russian wheat exporters exercised PTM in only a few importing countries over the whole time period, and (ii) PTM behaviour was more pronounced in the aftermath of the export tax period (i.e. 2008–2010) than before.     

How to Understand High Food Prices

Agricultural price booms are better explained by common factors than by market‐specific factors such as supply shocks. A capital asset pricing model‐type model shows why one should expect this and Granger causality analysis establishes the role of demand growth, monetary expansion and exchange rate movements in explaining price movements over the period since 1971. The demand for grains and oilseeds as biofuel feedstocks has been cited as the main cause of the price rise, but there is little direct evidence for this contention. Instead, index‐based investment in agricultural futures markets is seen as the major channel through which macroeconomic and monetary factors generated the 2007–2008 food price rises.     

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.     

Price Discrimination and Pricing to Market Behavior of Canadian Canola Exporters

The role of exchange rate fluctuation on the pricing behavior of Canadian canola exporters to Japan, Mexico, and the U.S. is examined using a model identifying noncompetitive and exchange rate related pricing behavior. Price discrimination was identified for Canadian canola exports to the three destinations over the period of 1993–99. Results also suggest that Pricing to Market strategies were employed for Japanese imports. Canadian canola exporters used local currency price stabilization to dampen the effects of relative price changes in the Japanese currency, perhaps linked to the large size of Japanese imports relative to Mexico and the U.S.     

Exchange rate alignment and producer support estimates (PSEs) for India

This article examines the effects of exchange rate alignment during 1985–2002 on agricultural producer support estimates (PSEs) for India. Based on several time series techniques, the equilibrium exchange rate of the Indian rupee and the corresponding misalignment of the actual rate are estimated and applied to recent PSE calculations. Our results show that the exchange rate was substantially misaligned before a financial crisis and macroeconomic reform in the early 1990s, with subsequent indirect effects on the PSEs. We find a relatively high pass‐through of exchange rate movements to domestic agricultural prices, so that removal of the exchange rate misalignment would have improved incentives to Indian farmers during this period. More recently, this indirect exchange rate effect is smaller than the direct effect in the PSEs, indicating the dominance of sectoral‐specific policies over economy‐wide policies.     

2部制水价应用研究

简介2部制水价的含义与模型，提出确定水利工程供水的2部制价格所依据的原则：可行性原则，促进水资源可持续发展原则，灵活性原则，全面性原则和可操作性原则。由于一个地区的水市场是一种垄断市场，需水方分为城市生活用水、工业用水和农业用水3方，各方的需求价格弹性不同。因此，可以实行价格歧视，对不同的市场收取不同的水费。在2部制水价模型的基础上，根据水商品的特性，利用价格歧视理论，提出了农业用水、工业用水和城市用水的差别定价理论并以河北省陡河水库为例进行实证分析。     

Post–Uruguay Round price linkages between developed and developing countries: the case of rice and wheat markets

The Uruguay Round Agreement on agriculture attempted to lower distortions in global agricultural markets. However, the significant fall in commodity prices in the late 1990s may have reduced the incentives for both developed and developing countries to better integrate into world markets. This study analyzes price linkages and adjustment between developed and developing countries during the post–Uruguay Round period. Prices of two key commodities, long‐grain rice and medium‐hard wheat, are assembled for major exporters and producers. Results of multivariate cointegration analysis suggest partial market integration between developed and developing countries in the post–Uruguay Round period. Developed countries are found to be price leaders in these two markets, and in most cases, changes in their prices have relatively large impacts on those of the developing countries. Developing countries (e.g., Vietnam and Argentina) have faced considerable price adjustment due to changes in the developed countries' prices.     

Price transmission,asymmetric adjustment and threshold effects in the cotton supply chain: a case study for Vidarbha,India

This study examines price transmission asymmetries in Vidarbha's (India) cotton supply chain from 2002 to 2012. The analysis takes account of thresholds in price adjustments toward their long‐run equilibrium. The first stage considers the price dynamics between international and Indian domestic cotton prices. The second stage considers price transmission from domestic to farm gate cotton prices in Vidarbha. Results from the first stage indicate that Indian and international cotton markets are well‐integrated. In contrast, the second stage reveals significant threshold‐type nonlinearities as well as asymmetries in price transmission between domestic and farm gate prices. The short‐run dynamics suggest that the pass‐through from domestic to farm gate prices is larger when domestic prices decrease than when they increase. Moreover, back of the envelope calculations suggest that the loss in revenue for a typical farmer from a decrease in domestic price is larger than the gains from an increase in domestic price of the same magnitude. The implication is that traders benefit from price fluctuations at the expense of farmers. Evidence from fieldwork in Vidarbha suggest that asymmetries revealed in this analysis may be linked to trader's market power and inadequate market information among farmers.     

Extent and possible causes of intrayear agricultural commodity price volatility

Wheat, corn, rice, soybeans, and cotton experienced higher volatility in the second half of the 2000s. For the sample at hand, the unit root tests only validate a new period of high volatility for wheat and cotton. If in the next couple of years however, corn, rice and soybeans maintain their higher volatility, a new period of high volatility may also be validated statistically. Regarding the factors driving the intrayear volatility GMM estimates show that “commodity market fundamentals” i.e., the stock‐to‐use ratio and to a lesser extent the degree of internationalization, are the most systematically statistically significant coefficients among commodities. Over time, consecutive low stock‐to‐use ratios and a thin international market provoke typically high volatility. Speculative activity and liquidity in the agricultural derivative market have a stabilizing effect on the spot price, if any. Finally, “common macro” factors significantly impact volatility, especially the volatility of petrol and of exchange rates; their dispersion importance over the sample is quite sizeable. However, it is difficult to establish a link between, on the one hand, loose monetary policy, business cycle and inflation, and, on the other hand, commodity price volatility, as the sign of the estimated coefficient changes depending on the commodity and the estimated elasticities are quite low.     

Residual demand measures of market power of Russian wheat exporters

Traditionally, the international wheat market has been considered a good example of a market with perfect competition. Yet, several articles provide evidence of imperfect competition and price discrimination in the wheat trade. However, these studies focused on traditional high‐quality wheat exporters such as Canada and the United States. In contrast, this article investigates whether Russian wheat exporters exercise market power in eight selected importing countries using the residual demand elasticity (RDE) model. The article makes two major contributions. First, it focuses on a nontraditional exporter, who exports mainly wheat of mediocre quality to low‐ and middle‐income countries. Second, the RDE model is estimated for the first time using a nonlinear estimator, the instrumental variable Poisson pseudo‐maximum likelihood estimator. This is important because the double logarithmic functional form can provide biased results in the presence of heteroskedasticity. The results indicate that Russian wheat exporters can exercise market power in only a few markets, while they are price takers in the majority of importing countries.     

Product Differentiation and Cost Pass‐Through

The present paper extends the existing literature on vertical price transmission and cost pass‐through by investigating the impact of product differentiation. We apply distance‐measures of product differentiation to a specific product market (yoghurt) within one country (Germany). Results from a panel‐error‐correction model for 30 products sold in 432 stores over a period of 312 weeks suggest that product differentiation explains a significant share of differences in cost pass‐through rates: more differentiated products command higher prices and are characterised by lower equilibrium cost pass‐through rates as well as more sluggish price adjustment.     

Monetary policy shocks and the dynamics of agricultural commodity prices: evidence from structural and factor‐augmented VAR analyses

Fluctuation in commodity prices is a significant and timely issue to be studied. This study is to examine the impact of monetary policy and other macroeconomic shocks on the dynamics of agricultural commodity prices. The major contributions of this study are twofold. First, unlike other studies that use indexes, this study analyzes the commodities individually, affording the inclusion of commodity‐specific fundamentals such as the level of inventory—an important determinant of commodity price—in a structural VAR framework. Second, it exploits a rich data set of agricultural commodity prices which includes commodities that are usually overlooked in the literature, and extracts a common factor using the dynamic factor model to understand the extent of comovement of the prices and to gauge the extent to which macroeconomic shocks drive the “comovement” in a factor‐augmented VAR (FAVAR) framework. The findings show that monetary policy, global economic conditions, and the U.S. dollar exchange rates play an important role in the dynamics of agricultural commodity prices.     

Pass-through of exchange rates and tariffs in Greek-US tobacco trade

The paper examines the extent to which exchange rate and unit tariff changes are passed-through in US import prices ot unmanufactured Greek oriental tobacco. The results indicate partial pass-through of exchange rates and tariffs. Exchange rate pass-through is about 0.272 and tariff pass-through about 0.185. One possible reason for the partial pass-through is oligopoly in tobacco exporting. Oligopoly would imply that depreciation of the drachma relative to the US dollar benefits tobacco exporters operating in Greece. A second possible reason is a possible correlation between exchange rates premiums paid to tobacco exporters in previous agricultural policies. An important implication ot this possible correlation is that Greek tobacco prices may be more sensitive lo exchange rate changes under the current agricultural policy.     

Modeling regime‐dependent agricultural commodity price volatilities

In stark contrast to financial markets, relatively little attention has been given to modeling agricultural commodity price volatility. In recent years, numerous methodologies with various strengths have been proposed for modeling price volatility in financial markets. We propose using a mixture of normals with unique GARCH processes in each component for modeling agricultural commodity prices. While a normal mixture model is quite flexible and allows for time varying skewness and kurtosis, its biggest strength is that each component can be viewed as a different market regime and thus estimated parameters are more readily interpreted. We apply the proposed model to ten different agricultural commodity weekly cash prices. Both in‐sample fit and out‐of‐sample forecasting tests confirm that the two‐state NM‐GARCH approach performs better than the traditional normal GARCH model. A significant and state‐dependent inverse leverage effect is detected only for pork in the regime where the price is expected to drop, indicating the volatility in this regime tends to increase more following a realized price rise than a realized price drop.     

What drives stock market integration? An analysis using agribusiness stocks

This article explores the drivers of regional stock market integration with a focus on the agribusiness sector across relevant regional trade blocs around the world. We implement panel cointegration models to analyze the stock indices of agribusiness firms in the Southern Common Market (MERCOSUR), European Union (EU), Asia‐Pacific Economic Cooperation (APEC), and North American Free Trade Agreement (NAFTA). Based on the literature on market integration and stock return pricing, we identify nine possible determinants of stock market integration, which we separate into three categories: individual market performance, macroeconomic conditions, and agricultural trade. In our analysis, we account for agriculture‐specific factors to control for possible structural shifts in financial markets regimes by including the two main commodity price bubbles during last 20 years. Our results show that most of the variables included in our categories have been important factors in promoting regional stock market integration. Moreover, integration among regional stock markets was strengthened by the implementation of trade agreements. This effect is stronger in trade blocs with fewer members, such as NAFTA and MERCOSUR, compared with larger and more heterogeneous blocs, such as the EU and APEC.     

Modeling and Extrapolating Wheat Producer Support Using Income and Other Factors

Using wheat market support data from 55 countries for 1961–2011 from the World Bank Agricultural Distortion database, we develop a fixed effect model that shows a more complicated, nonlinear relationship between income and wheat support and its components than previously realised. We find that income generally has a greater effect on border market price support than on domestic price support. Moreover, the difference between these types of support is greater for net importers than for net exporters and has increased with the URAA or WTO accession. Holding other variables constant, the wheat support level of China, driven mainly by border market price support, is projected to rise with future income growth. Meanwhile, Japan is projected to maintain its high level of support, while the US and EU are projected to maintain their lower levels of support. These results are relevant in the context of multilateral trade negotiations, arguing against a narrow focus on past or current policy profiles and for long‐run analyses that might mistakenly rest on the inconsistent assumptions of constant agricultural policies against the backdrop of rising incomes.     

World Commodity Prices and Domestic Retail Food Price Inflation: Some Insights from the UK

We focus on two aspects of the links between world commodity prices and retail food price inflation: first, the effects of exchange rates and other input costs, and second; the effects of the duration of shocks on world commodity markets, not just the magnitude of price spikes (the latter often commanding most attention). The UK offers a natural and rather unexplored setting for the analysis. Applying time series methods to a sample of 259 monthly observations over the 1990(9)–2012(3) period we find substantial and significant long‐term partial elasticities for domestic food price inflation with respect to world food commodity prices, the exchange rate and oil prices (the latter indirectly via a relationship with world food commodity prices). Domestic demand pressures and food chain costs are found to be less substantial and significant over our data period. Interactions between the main driving variables in the system tend to moderate rather than exacerbate these partial effects. Furthermore, the persistence of shocks to these variables markedly affects their effects on domestic food prices.