Food Grain Policies in India and their Implications for Stocks and Fiscal Costs: A Dynamic Partial Equilibrium Analysis

We analyse current and possible future reforms of the Indian food policies for the most important staple grains, wheat and rice, within a two‐commodity dynamic partial equilibrium model with stochastic shocks. The model is empirically grounded and reproduces past values well. It uses a new reduced‐form approach to capture private storage dynamics. We evaluate the implementation of the National Food Security Act (NFSA) under several policy measures with the current regime as well as two scenarios with a regime change – implementation of cash transfers and deficiency payments. Implications for market fundamentals and fiscal costs are simulated in the medium term – until 2020/21. The NFSA puts a high pressure on fiscal costs and public stocks. Relying on imports with low support prices results in low fiscal costs and stable, but higher domestic and international prices, and a high risk of zero stocks. A policy strategy to manipulate procurement prices in order to maintain public stocks close to the norms leads to slightly higher fiscal costs with lower, but more volatile prices. The highest domestic price volatility occurs under a strategy which uses export bans in order to maintain sufficient public stocks. A cash‐based regime can bring considerable savings and curb fiscal costs, particularly if targeted to the poor, and would leave sufficient stocks due to higher private stocks.     

Price dynamics in the Bangladesh rice market: implications for public intervention

In this paper, the price dynamics of a rice market are examined using dynamic programming techniques. The model is parameterised to the case of Bangladesh and thus represents the situation of a very poor country which has characteristically high price elasticity (due to income effects) and high storage and interest costs. The incentives for private sector storage and its impact on price stability are examined. Various options for public intervention in the storage sector are also explored, including price ceiling schemes and subsidisation of storage costs. Results show that interventions that remove private disincentives (such as storage subsidies) are much cheaper than direct intervention by government, but the impact on the probability distribution of prices is quite different. The effect of trade on the probability distribution of prices is also examined.     

Importing High Food Prices by Exporting: Rice Prices in Lao PDR

Lao PDR has extensive export controls on its staple food, glutinous rice, which keep domestic prices low relative to international prices. Using price, harvest, and export data this paper analyses how glutinous rice prices in Laos PDR are related to those in its trading partners, Thailand and Vietnam. We find that rice prices in Lao PDR are more likely to rise following a good harvest year than a bad or a normal year. This is consistent with export controls being relaxed after good harvests, leading to an increase in exports early in the season and rising prices later as stocks are depleted. There is thus a case for removal of trade restrictions since they give rise to price spikes while keeping the long‐term price of glutinous rice low, and thereby hinder increases in income from agriculture. However, since high rice prices are likely to affect the poor negatively in the short to medium term, a combination of an export tax and cash transfers is recommended during the transition period. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food.     

Transaction Cost Thresholds in International Rice Markets

Recent episodes of high and volatile prices for grains such as rice have raised concerns about their implications for hunger and poverty. We model price relationships between international rice prices and 221 domestic prices in 47 developing countries that import rice. We use a threshold vector error correction model that accounts for transaction costs of trade in spatial price transmission, and an improved regularised Bayesian threshold estimator for threshold models. Our results show that threshold values are higher after 2008 than before, which suggests that transaction costs in international rice trade have increased in recent years. Threshold values are highest for Latin American countries followed by African and Asian countries, and higher for retail than for wholesale prices. Since 2008, price transmission is slower in countries that responded to high and volatile prices with domestic market‐based interventions such as price controls and faster in countries that responded by lowering tariffs and by implementing production support measures.     

Market integration between surplus and deficit rice markets during global food crisis period

Applying the maximum‐likelihood method of co‐integration, this study analysed spatial market integration between an adjacent rice surplus market (India) and deficit markets (Bangladesh and Nepal). The main focus is on the government policies of these three rice‐producing countries which have been imposed to reduce domestic price volatilities in rice markets during the recent ‘global food crisis’ in 2007–2008. The co‐integration tests find that domestic rice prices of India, Bangladesh and Nepal are integrated both in short‐run and long‐run periods despite the imposition of export restriction policies by India. The reason that prices are transmitted so effectively is most likely to be the widespread informal cross‐border trade through the porous borders among India, Bangladesh and Nepal.     

新一轮国际粮食价格上涨：原因及对中国市场的影响

[目的]随着中国粮食进口不断增加,国内外市场联系越来越紧密。2020年下半年以来,国际市场粮食价格快速上涨,对国内粮食市场产生一定影响,分析国际市场价格上涨的原因和影响对确保国内粮食供应稳定、保障国家粮食安全具有重要意义。[方法]文章分析了2019年以来小麦、大米、玉米、大豆4种粮食产品的国内外价格走势,从供需状况、贸易政策、气候变化等因素分析国际市场价格波动的原因,并探讨了国际价格对国内价格的影响。[结果]当前全球主要粮食品种供应充足,库存仍处于较高水平,此轮国际粮食价格上涨主要是受到美国等发达国家宽松的货币政策以及疫情后全球消费逐步回暖的影响;但国际市场价格上涨对中国市场的影响总体有限,国内小麦、大米、玉米价格上涨的主因是国内消费回暖和生猪产能恢复带动的饲用需求快速增长,油用大豆受国际市场的影响较大。[结论]为稳定国内粮食市场,避免国际市场的冲击,中国要进一步提升粮食综合生产能力,强化科技支撑,加强粮食储备管理,健全政策支持体系,并引导居民建立科学的消费观念。     

Dynamics of rice prices and agricultural wages in the Philippines

Rice trade liberalization in the Philippines should decrease domestic rice prices impacting both agricultural wages and the welfare of agricultural wage earners. This study examines the short-run and long-run relationship between rice prices and agricultural wages in the Philippines using a neoclassical wage determination model. Three empirical frameworks are used—a cointegration/error correction framework, which assumes nonstationary variables in long-run equilibrium, a first difference model that assumes nonstationary variables but no long-run equilibrium, and an OLS framework that assumes the model variables are stationary. Conclusions are reasonably robust across the three empirical frameworks with wages adjusting positively to rice price changes with a short-run elasticity of 0.29 to 0.57, and a long-run elasticity of 0.70 to 1.0 in preferred models. An analysis of welfare implications suggests that although households that are heavily reliant on agricultural wages for income will be adversely affected by rice price decreases, other households will benefit.     

Export Restrictions and Smooth Transition Cointegration: Export Quotas for Wheat in Ukraine

We extend previous modelling approaches to identify domestic price effects of export controls. We allow for smooth transition between free‐trade price transmission regimes and those under export restricting regimes, using a smooth transition cointegration (STC) approach, rather than the more common assumption that regime changes are abrupt. Our approach has the advantage that the switch in the price transmission regime may be induced not only by an actual but also by an expected policy change. Results confirm the gradual nature of the transition between the regimes, which reflect trader heterogeneity and wheat storage decisions. We find that the STC approach outperforms alternative model approaches in terms of both regime classification and goodness of fit, when explaining Ukrainian domestic wheat prices under export controls. In particular, application of the Markov‐switching error correction model (MSECM) to the same data generates results which do not reflect any identifiable economic reality (in contrast to Götz et al., 2013 ).     

Market Power and World Price: The Role of Asian Rice Exporters

An attempt has been made in this study to assess the market power of major Asian exporters in world rice market using standard oligopoly models. Quantity has been used as the strategic variable based on previous literature. Structural and reduced form approaches have been used. Results indicate that the major Asian rice exporters like Thailand, China, and India face a downward sloping demand curve whereas the United States does not appear to possess market power. However, the results are inconclusive about the precise market structure. The results, in the backdrop of the history of world rice markets, indicate a need for Asian exporters to rely more on trade than on domestic stocks in order to reduce the thinness of world rice market.     

价格支持、政策调整及粮食市场波动

目的 为了估计价格支持政策对不同粮食品种期现货价格波动的直接影响,实证分析和比较了政策及其调整对粮食期现货价格波动实施效果的影响,为深化粮食价格形成机制改革提供一定的理论参考和实证支撑。方法 文章利用稻谷、小麦、玉米和大豆的现货与期货价格日数据,将政策以虚拟变量的形式引入GARCH模型实证分析最低收购价政策、临时收储政策及其调整对平抑粮食期现货市场波动的作用。结果 价格支持政策对粮食价格波动产生了显著影响,最低收购价政策能够明显降低稻谷和小麦现货市场的波动程度,但对期货市场波动的作用则相反;玉米和大豆临时收储政策的取消导致现货市场波动性提高,而对期货市场波动的影响存在差异。结论 价格支持政策具有降低价格波动的作用效果,政策调控效果与实施品种的国内供求及市场形势、国内外市场的联系程度密切相关,政策的完善还需关注对期货市场波动的影响。     

CAP Reforms in the 1990s and their Price and Welfare Implications: The Case of Wheat

We use a nonlinear commodity market model to assess, theoretically and empirically, the impacts of recent reforms of the CAP on prices and economic welfare in the EU. The empirical analysis is based on an aggregate structural econometric model of the EU wheat economy and its links to the rest of the world. Instability issues are also investigated. Impacts of CAP reforms on the variance of domestic and world prices are analysed and a Monte Carlo simulation is used to evaluate uncertainty in the model's welfare computations. Recent reforms led to a net welfare gain within the EU during the period 1993–2000. Additional budgetary costs are less than the welfare gains of consumers and producers. Producers gained as lower price support was overcompensated by additional direct payments.     

Enhancing food security in South Sudan: the role of markets and regional trade

South Sudan faces serious problems of food insecurity due to low levels of domestic food production, periodic droughts, widespread poverty, and since late 2013, renewed armed conflict. This article explores market price behavior using cointegration analysis and estimates the effects of production and trade shocks through multimarket model simulations. We show that market prices in the capital city, Juba, of both maize and sorghum are cointegrated with import parity prices of these cereals sourced from Uganda, consistent with observed trade flows. Model simulations, using econometrically estimated demand parameters, suggest that private sector imports of maize and wheat would greatly mitigate the potential fall in consumption in the case of a decline in domestic cereal production. Other simulations indicate that if total imports of cereals are reduced by one‐third (still more than two times the levels of food aid in 2013) because of disruptions to private market flows, domestic prices of cereals could rise by 45% or more. The article concludes that whatever measures are taken involving national food security reserves, it is crucial that government policy serves to maintain incentives for private sector imports to avoid destabilizing market supplies, domestic prices, and ultimately, food consumption of the poor.     

Global market shocks and poverty in Vietnam: the case of rice

World food prices have experienced dramatic increases in recent years. These “shocks” affect food importers and exporters alike. Vietnam is a major exporter of rice, and rice is also a key item in domestic production, employment, and consumption. Accordingly, rice price shocks from the world market have general equilibrium impacts and as such, their implications for household welfare are not known ex ante. In this article, we present a framework for understanding the direct and indirect welfare effects of a global market shock of this kind. We quantify transmission of the shock from global indicator prices to domestic markets. Then we use an applied general equilibrium model to simulate the economic effects of the price changes. A recursive mapping to a nationally representative household living standards survey permits us to identify in detail the ceteris paribus effects of the shock on household incomes and welfare. In this analysis, interregional and intersectoral labor market adjustments emerge as key channels transmitting the effects of global price shocks across sectors and among households.     

Regional Price Effects of Extreme Weather Events and Wheat Export Controls in Russia and Ukraine

We build on the price transmission framework to identify domestic wheat price effects of wheat export controls. We explicitly take into account that a harvest failure causes domestic price effects. Moreover, the analysis at the regional level provides further evidence of the functioning of export controls in a large country. Results suggest a pronounced regional heterogeneity in the strength of domestic price effects of the 2010/11 export ban in Russia. The wheat price dampening effects amount to up to 67% and are strongest in the major wheat exporting region with direct access to the world market. This effect is transmitted to other regions by increased and reversed interregional trade flows. In contrast, we find that regional variation of export controls’ domestic price effects in Ukraine is rather small.     

中国与“一带一路”国家农产品价格关联性研究——兼论中美贸易摩擦的影响

本文采用溢出网络方法及2010-2018年大豆、小麦、玉米月度价格数据,实证分析中国与“一带一路”沿线国家间农产品价格的多维关联特征,并着重探讨中美贸易战对该价格关联性的影响.结果 显示:(1)总体而言,中国与沿线国家间的小麦、玉米价格存在较强关联性,大豆价格关联性较弱,且关联程度在全球供给冲击和A股股灾期间显著上升;...     

国际大米价格波动对国内大米价格的传递效应研究

［目的］国际粮食价格波动会对国内粮食价格产生影响,其影响程度和途径一直是农产品价格领域的研究热点。［方法］基于2002年1月至2017年6月的月度数据,运用Johansen协整检验和向量误差修正模型检验了国际大米价格与国内大米价格的长期均衡与短期输入关系,在考虑国内大米价格形成机制的基础上分析了国际大米价格的影响程度,并进一步检验了大米与其他粮食品种价格间的整合关系。［结果］（1）国内大米价格与国际大米价格保持长期均衡关系,短期内国内大米价格对国际大米价格波动的弹性为00226。（2）国际大米价格对国内大米价格具有显著的影响,在控制其他变量不变的前提下,国际大米价格每上涨1%,国内大米价格会上升约01%。（3）Johansen协整检验表明大米会与其他粮食品种价格保持长期整合关系,国际大米价格上涨可能会通过间接渠道传递至国内大米市场。［结论］因此不仅需要关注国际大米价格对国内大米价格的影响,还需要关注其他粮食品种对大米价格的影响。     

Agricultural price distortions: trends and volatility,past, and prospective

Historically, earnings from farming in many developing countries have been depressed by a pro‐urban bias in own‐country policies, as well as by governments of richer countries favoring their farmers with import barriers and subsidies. Both sets of policies reduced global economic welfare and agricultural trade, and added to global inequality and poverty. Over the past three decades, much progress has been made in reducing agricultural protection in high‐income countries and agricultural disincentives in developing countries. However, plenty of price distortions remain. As well, the propensity of governments to insulate their domestic food market from fluctuations in international prices has not waned. Such insulation contributes to the amplification of international food price fluctuations, yet it does little to advance national food security when food‐importing and food‐exporting countries equally engage in insulating behavior. Thus there is still much scope to improve global economic welfare via multilateral agreement not only to remove remaining trade distortions but also to desist from varying trade barriers when international food prices gyrate. This article summarizes indicators of trends and fluctuations in farm trade barriers before examining unilateral or multilateral trade arrangements, together with complementary domestic measures, that could lead to better global food security outcomes.     

Social welfare effects of removing multiple exchange rates: evidence from the rice trade in Iran

In order to encourage the involvement of the private sector in importing rice, the Iranian government plans to relax the system of multiple foreign exchange rates applied to importers wishing to supply the domestic market. In this article, the welfare effects of removing the current controls on the rice trade, and a domestic rice coupon program, are evaluated by applying a partial equilibrium analysis to 1961–1999 data. The results show that, as far as foreign exchange is concerned, liberalization of the rice market causes an increase in rice imports, mainly due to a decrease in domestic supply. In welfare terms, the loss in producer surplus from rice market liberalization is relatively high, but most rice consumers, and the Iranian taxpayer, would gain. Overall, gains to consumers and taxpayers are estimated to be higher than the losses incurred by domestic suppliers, and therefore net social welfare at national level can be improved by rice market liberalization in Iran. Issues for further discussion include residual food security roles for the state, and supply‐side adjustments in terms of resource use and higher‐quality production.     

Wheat stocks and the cointegration of wheat prices

We examine the effect of wheat stocks on the relationship between port and inland wheat prices in western Canada after the dissolution of the Canadian Wheat Board in 2012. Standard statistical tests find no evidence that the port price is cointegrated with inland prices. We argue that large harvests in 2013–2014 and 2014–2015 are responsible for this lack of cointegration. A simple theoretical model demonstrates how wheat stocks drive a wedge between inland and port prices. After including wheat stocks in the cointegrating vector, we find the expected cointegrating relationships between the port and inland prices. Using an error correction model, we show that a 10% increase in the wheat stocks reduces producer prices in Alberta and Manitoba by 6% and 4%, respectively. We conclude by discussing policy options for reducing the size of wheat stocks on the prairies.     

INSTABILITY IN WORLD GRAIN MARKETS

The paper discusses the nature of international price variability for wheat and coarse grains. In particular, it explores the relationship between variability in national grain markets and international trade. Empirical evidence is presented on the degree to which short-run fluctuations in domestic grain production are transmitted to the world market by major countries or country aggregates, and on their absorption of international market variability. The impact of possible structural or policy changes upon future international price variability is explored. It is argued that multilateral action to promote greater international stability should focus on the modification of domestic storage policies to reduce the transmission of short-run domestic fluctuations in supply or demand to world markets.