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.     

Testing vertical price transmission for Vietnam's Robusta coffee

Vietnam has undergone market reforms over the last three decades; and as a consequence, the coffee sector has become increasingly market‐driven. The success of the government's liberalisation policies in terms of market efficiency is investigated by examining the transmission of both positive and negative price changes for Robusta coffee between export and farmgate prices. We used a threshold vector error correction model and high‐frequency daily data. The primary result here is that of a symmetric price transmission between export and farm‐level prices. This result holds when tested with weekly price data, derived from the daily data. Farmgate prices respond faster to decreases than increases in export prices when the long‐run deviation exceeds a certain threshold. These price changes are transmitted within several days. This research also confirms the importance of transaction costs, and other price frictions mostly ignored in prior analyses for coffee.     

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.     

Food crops, exports, and the short-run policy response of agriculture in Africa

The response of agriculture to changes in relative prices is an important factor in the success of structural adjustment programs in Africa. In this paper I estimate supply functions for total agricultural output, food crops and export crops in 14 African countries for the years 1975 to 1990. Food and export crops are substitutes in production in the short run. Total agricultural output responds negatively to increases in export prices and positively to increases in food prices. A plausible explanation is that as farmers shift resources to export crop production, food supply falls in the short run, while the increase in export supply may take several years to materialize. The exchange rate is significant in explaining both food and export crop production and aggregate agricultural supply, suggesting that the exchange rate is acting as a proxy for excluded macroeconomic variables or that changes in the exchange rate are not passed immediately through to prices.     

Livestock pricing policy in sub-Saharan Africa: objectives,instruments and impact in five countries

Livestock pricing policies in many developing countries are often instituted without a good appreciation of the consequences of such policies for allocative efficiency, output and trade. This paper evaluates, in a comparative cross-country context, the objectives and instruments of livestock pricing policy in five sub-Saharan African countries: Ivory Coast, Mali, Nigeria, Sudan and Zimbabwe during the period 1970-86. It assesses the extent to which pricing policy objectives have been attained, and also estimates the effects of price interventions on output, consumption, trade and government revenues in order to draw out lessons for the future. The empirical results indicate that in comparison with real border prices, a certain degree of success was achieved in stabilising real domestic producer prices in the study countries. The results also show that since the early 1980s, there has been a gradual shift away from taxation of producers. However, consumers still appear to gain as much as producers in three of the study countries, with negative consequences for foreign exchange earnings and government revenues. The analysis reveals the importance of domestic inflation and exchange rates as key variables for livestock pricing policies and highlights the need to address the macroeconomic imbalances that cause exchange rate distortions and high domestic inflation at the same time that direct price distortions are being tackled.     

The welfare implications of Brazil's coffee export price subsidies during the ICA

To increase coffee export revenues during the International Coffee Agreement, Brazil provided selected purchasers with export rebates that could be used to pay for future coffee purchases. This subsidy mutated and grew over time, encouraged by rent seeking. The subsidy had huge cost to the Brazilian Treasury, $9.8 billion in constant 1982 US dollars, or about 13% of coffee export revenues. As exports were usually quota‐constrained, the subsidy increased Brazil's international coffee price, particularly during 1980–1986, absolutely and relative to its competitors’ prices. The unexpected variation in Brazil's price also caused the New York Coffee, Sugar, and Cocoa Exchange to terminate trading in Brazilian coffee futures, making it more costly to hedge Brazilian coffee until today. The econometric evidence is mixed, but it seems likely the subsidy reduced Brazil's net economic welfare and redistributed income from the Treasury to foreign roasters, domestic exporters, and government bureaucrats.     

El Niño,La Niña,and world coffee price dynamics

Coffee is produced in equatorial and subequatorial regions of the world, which are also most affected by El Niño Southern Oscillation (ENSO). ENSO events have a tendency to amplify weather conditions such as droughts or excess precipitation in the affected regions, resulting in production shortage or excess supply, subsequently impacting agricultural commodity prices. In this research we assess effects of ENSO events on world coffee price dynamics using the monthly data between March 1989 and December 2010. We employ smooth transition autoregression framework to examine nonlinear dynamics of ENSO and coffee prices, and illustrate the results of this research using generalized impulse‐response functions. We find that ENSO events indeed have short‐term impacts on coffee prices. The research findings are of interest to coffee producers and intermediaries in the coffee markets as well as researchers in the fields of environmental and development economics.     

Pricing to market behaviour of India's high value agri‐food exporters: an empirical analysis of major destination markets

The pricing behaviour of India's high value agricultural and food exporters in their major destination markets is examined using a pricing‐to‐market (PTM) model for noncompetitive and exchange rate related pricing behaviour. The analysis was undertaken in a context where India is showing high commodity concentration in agricultural trade. The econometric analysis employed is panel corrected standard errors (PCSE) estimation technique. The results indicated evidence of a greater degree of imperfect competition either through price discrimination across destinations or through imperfect exchange rate pass‐through. The analysis of exchange rate effects showed that the local currency price stabilization by the Indian exporters were more prominent than the amplification of exchange rates. The analysis of the asymmetric effects of exchange rates on export prices showed that in most cases the depreciation of Indian rupee had a greater impact than the appreciation. Moreover the results showed that the exchange rate pass‐through is sensitive to the kind of exchange rate index utilised. In our analysis we found that the commodity specific exchange rate better predicts the pricing to market behaviour in most cases.     

Pseudo panel data estimation technique and rational addiction model: an analysis of cigarette,alcohol and coffee demands

We use a pseudo‐panel data approach to analyze the relationship between the consumptions of cigarettes, alcohol, and coffee in a rational addiction framework. We find that while cigarette and coffee demands fit well with the rational addiction model, alcohol demand conforms to a model with inventory effects. The results suggest that alcohol consumption increases the marginal utility derived from consumption of cigarettes. Increasing alcohol prices would decrease not only the consumption of alcohol, but also the consumption of cigarettes. On the other hand, increasing cigarette prices do not have the same effect on consumption of alcohol. The cross‐price elasticity of coffee with respect to cigarette price is positive and significant which suggests that coffee substitutes for cigarettes when cigarette prices increase. The cross‐price elasticity of alcohol with respect to coffee price is found to be negative and significant. On the other hand, Morishima elasticities of substitution indicate that cigarette, alcohol and coffee substitute each other along the indifference curve when relative prices change.     

Impacts of the End of the Coffee Export Quota System on International‐to‐Retail Price Transmission

We examine the impact of the end of the coffee export quota system (EQS) on international‐to‐retail price transmission in France, Germany and the United States. We take account of the existence of long‐run threshold effects and short‐run price transmission asymmetries (PTAs). We find evidence of threshold effects in both periods (EQS and post‐EQS) in all three countries and the presence of short‐run PTAs during the post‐EQS period in all countries, but not during the EQS period. Our results indicate that the threshold values are smaller in the post‐EQS period, suggesting that retail prices became more responsive to changes in international prices. However, the speed of adjustment towards the long‐run equilibrium decreases during the post‐EQS period in the three countries. In the short run, non‐linear impulse response analyses indicate that a shock in international prices was more persistent during the EQS period than in the post‐EQS period. Moreover, we find evidence of short‐run PTAs in the post‐EQS period, with differences across countries. We find support for the ‘rockets and feathers’ principle in the United States; in contrast, retail prices respond faster when international prices are falling in Germany and France. We explain these differences in terms of market structures.     

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.     

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.     

Do farmers benefit from participating in specialty markets and cooperatives? The case of coffee marketing in Costa Rica1

Historically low prices in the conventional coffee market have caused financial and social hardship among coffee farmers. In the face of this crisis, specialty markets have attracted the attention of the international donor community. These market segments have shown consistent growth over the last decade and exhibit price premiums in international markets. Therefore, if higher prices are passed on to farmers, access to specialty markets could help to alleviate the crisis brought on by low prices in the conventional sector. The present study attempts to identify the factors that determine farmers' participation in specialized markets and whether participation in these markets leads to higher prices for farmers. A two-stage model is used to analyze farmers' marketing decisions and their effect on the prices received. This procedure allows us to control for the endogeneity bias introduced by the marketing choice. Our results indicate that farmers participating in the specialty coffee segment do in fact receive higher prices than those participating in conventional channels. Additionally, we find that participation in cooperatives has a positive impact on the probability that a farmer chooses to grow specialty coffee and analogously on the prices that they receive. Based on these results, it seems that efforts to increase participation in the specialty coffee segment and in cooperatives would help to lessen some of the hardships brought on by low prices in the conventional coffee sector.     

Do ‘foreigners’ pay more? The effects of investor type and nationality on office transaction prices in New York City

Are commercial real estate prices in metropolitan New York affected by the type or nationality of the investors involved in a transaction? Previous research has highlighted differences in pricing between in-state and out-of-state investors and between different types of investors, but there are few extant studies that consider the influence of nationality on pricing at a micro-level. Foreign investors might pay more than domestic investors for commercial real estate assets because of a lack of information or experience in the market concerned. However, they might use local partners or brokers to mitigate such problems. To explore these issues, we use data provided by Real Capital Analytics on over 3000 office transactions in the New York metro area from 2001 to 2015. We use hedonic regression techniques and propensity score matching to examine whether pricing differs across investor groups after controlling for asset attributes. We find that foreign investors pay more than domestic investors at acquisition, but receive more when selling assets. Tests suggest that it is unmeasured aspects of quality that explain any apparent overpayment for offices in this location, not information issues.     

How Might Shadow Price Restrictions Reduce Technical Efficiency? Evidence from a Restricted DEA Analysis of Coffee Farms in Vietnam

We use data from smallholder coffee farms in Vietnam to measure the technical efficiency of coffee producers, and the degree to which potential restrictions on the shadow prices of chemical inputs might reduce overall efficiency among these farmers. Using input‐oriented data envelopment analysis (DEA) we find the use of pesticide and herbicide accounts for a relatively small proportion of overall technical efficiency in the sample. We place restrictions on input shadow prices and show that restricting their importance does not dramatically alter patterns or measures of short‐run efficiency.     

The impact of coffee price changes on rural households in Uganda

Employing household survey data covering the periods 1992–1993, 1995–1996, and 1999–2000, this article shows for the case of Uganda that a coffee market liberalization followed by a price boom was associated with substantial reductions in poverty, which could even be sustained when prices went down again. Coffee is not planted by the richest farmers and the gains from higher coffee prices accrued to poorer and richer coffee farmers alike. Nor were poorer farmers hurt disproportionately when prices fell. In addition, we find strong spillovers from coffee production to other agriculture, which tends to favor the poor, and to nonagricultural activities. These multiplier effects are concentrated in coffee regions. In an economic environment characterized by a booming agricultural sector, coffee farmers were able to accommodate the negative price shock, in particular through agricultural diversification. General agricultural growth also cushioned possible negative multiplier effects in coffee regions. Overall, the case of coffee in Uganda thus lends support to the view that agricultural trade liberalization is beneficial for the poor.     

SOME ESTIMATES OF SUPPLY ELASTICITIES FOR NIGERIA'S CROPS*

The production of export crops or cash crops as they are called in developing countries is subject to various characteristics which affect supply and producer response relationships. For perennials such as cocoa, oil palms, rubber, and coffee which are produced in Nigeria, cultivation involves planting, gestation, removal, yield, replacement, rehabilitation, etc. For annuals such as cotton, groundnuts and soya beans exported from Nigeria, similar situations, excluding gestation and replacement problems, are involved. Models for estimating supply schedules and response must be complex and highly demanding in data in order to encompass these dimensions. The models developed in this study rest on the classical assumption of rational producers who respond positively to producer prices. Because of data limitations ordinary least squares (O.L.S.) regression is employed to develop three types of price elasticities of supply for six commodities - cocoa, palm oil kernel, groundnut, rubber and cotton. The results confirm the response to depressing pricing policies of the Marketing Boards in Nigeria and suggest policy implications of price and production incentives as positive means of enhancing improved production response designed to rejuvenate Nigeria's export crop industry under economic development.     

World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

Using a generalized error correction model, this article measures and compares market integration for export cash crops versus imported food crops for Mali and Nicaragua, and computes transmission elasticities between changes in the goods’ border and domestic prices. Both Mali and Nicaragua obtain the bulk of their export revenue from a particular agricultural commodity—cotton for Mali and coffee for Nicaragua—and both import the same key staple food of rice. To reap the economic gains from this trade specialization, the two countries’ agriculture must be well‐integrated into world markets. The two countries present an important policy contrast that affects their degree of world market integration and price transmission. In Mali, a parastatal enterprise controls its cotton industry, while Nicaragua has less state direction over agriculture. Reflecting this difference, the results show that for both its main export and import commodity, Nicaragua is more integrated into world markets and has higher price transmission than Mali. The results for Nicaragua also show much higher integration and price transmission for its main agricultural export (coffee) than its major import (rice).     

Is Exchange Rate Pass-Through in Pork Meat Export Prices Constrained by the Supply of Live Hogs?

The impact of lags in the production and marketing of agricultural products on the degree of exchange rate pass-through in export prices is investigated. The predictions of the theoretical model are tested by investigating Canadian pork export prices in the United States and Japan. The empirical methodology accounts for unit root and cointegration using the dynamic seemingly unrelated regression framework and a minimum distance estimator. Predetermined hog supplies have a statistically significant impact on export prices of two out of three Canadian provinces. The degree of misspecification involved with standard pass-through models that do not account for production lags is also illustrated.     

Ethiopia's Coffee Sector: A Bitter or Better Future?

Coffee, Ethiopia's largest export crop, is the backbone of the Ethiopian economy. The Ethiopian coffee sector is highly dependent on international prices and affected by the structure and workings of the world coffee market. In this context, this paper seeks to identify what can be done in Ethiopia to improve the performance of the sector so as to yield benefits for the government and the estimated 15 million people dependent on coffee in the country. The paper argues that despite a limited room for manoeuvre, Ethiopia has not yet fully exploited its position as the producer of some of the best coffees in the world. A number of competitive advantages may still be seized if quality and consistency are guaranteed. In order to maximize this potential, and on the basis of a critical analysis of government policies and donor interventions in the sector, a number of recommendations are made.