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.     

El Niño southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models

In this research, we examine the effects of El Niño southern oscillation (ENSO) on market dynamics of major vegetable oil prices. We adopt a smooth transition vector error correction modelling framework to analyse the impacts of ENSO events on the vegetable oil prices and, more interestingly, to investigate the asymmetric nature of the ENSO dynamics and price responses to ENSO shocks. The results confirm self‐exciting type nonlinearities in the ENSO dynamics, and presence of the so‐called transactions cost band in the system of vegetable oil prices. These nonlinearities yield the history‐specific asymmetries in the vegetable oil price dynamics, wherein effects of ENSO shocks on the ENSO dynamics and the vegetable oil prices vary considerably between different ENSO regimes. In general, positive deviations, El Niño events, result in the vegetable oil price increase, while negative deviations, La Niña events, result in decrease in the prices. We illustrate these effects using generalised impulse‐response functions and the derived asymmetry measures.     

Climate and agricultural risk: measuring the effect of ENSO on U.S. crop insurance

Predictive models of climatic phenomena can aid in insurance program design and decision making. Extreme weather outcomes have been linked to the El Niño Southern Oscillation (ENSO), which globally impacts agricultural production. This study demonstrates that extreme ENSO events alter cotton yield distributions in the Southeastern United States. These impacts translate into economically meaningful effects on crop insurance premium rates. Commercial insurers can use publicly available information to determine if government‐set premium rates are mispriced, and in turn extract economic rents via the federally mandated Standard Reinsurance Agreement. By ceding underpriced policies in El Niño and La Niña years, we find that private insurance companies can reduce paid indemnities by 10–15% on average.     

Short-Run Supply Responses in the U.S. Beef-Cattle Industry

This article investigates the response of beef-cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that separates the markets for fed and unfed beef. This separation generates predictions that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks.     

Tracing the evolution of the aggregate U.S. milk supply elasticity using a herd dynamics model

The U.S. dairy sector is characterized by increasing volatility of milk prices, and consolidation in production as evidenced by declining number of dairy farms with an increasingly larger share of milk supplied from a small number of very large farms. Using aggregate national data, we build a mixed‐frequency herd dynamics econometric model of the U.S. milk supply that updates and substantially amends the model first proposed by Chavas and Klemme. We implement a dynamic residual‐based bootstrap technique that can be used in testing for changes in nonmarginal simulated long‐run supply responsiveness, and trace the evolution of long‐run milk supply elasticity from 1975 through 2010. Several papers in the past have suggested that long‐run supply elasticity increases with dairy farm size, which implies that increased importance of large farms would increase aggregate long‐run supply responsiveness. Contrary to this conclusion, we find a declining trend in long‐run supply elasticity from 1975 through 2005. Persistence of such a decline would be a major cause for worry, as ever larger price swings would be needed to equilibrate the market in face of demand shocks. However, we find that milk supply is becoming more responsive since 2005 both to milk and feed price changes. Increasing responsiveness to feed prices further justifies focusing the next generation of the dairy policy instruments on managing dairy profit margins rather than just revenue streams.     

AGRICULTURAL EXPORTS OF DEVELOPING COUNTRIES: ESTIMATES OF INCOME AND PRICE ELASTICITIES OF DEMAND AND SUPPLY

This paper provides new evidence on income and price elasticities of demand and supply of agricultural exports from developing countries, on the basis of (a) a consistent and fully specified supply and demand model, and (b) statistical estimation procedures not frequently used in the estimation of agricultural export functions. Estimates of price and income elasticities of demand for aggregate agricultural exports for all developing countries taken together — as distinct from individual exporting countries — are found to be low; moreover, export price as distinguished from non-price factors plays a relatively insignificant role in increasing export supply. Hence, an attempt by all developing countries to expand traditional agricultural exports with low price elasticity of demand may not yield rising earnings for all; but in fact may result in falling export revenues. Insofar as individual exports of all developing countries (not individual countries) are concerned, income and price elasticities of demand for such tropical commodities as tea, coffee, cocoa and bananas are also found to be low, except for new, non-traditional exports like pineapples. This indicates the importance of diversification of agricultural exports as a vehicle for their future growth.     

Co-integration and error-correction modelling of agricultural export supply in Cameroon

Estimates of factors influencing Cameroon^,s exports of cocoa, coffee and cotton are derived in a system of equations using the Engle-Granger and Johansen co-integration and error-correction representation procedures. Two co-integrating vectors involving cocoa and coffee exports as endogenous variables are identified in the system while tests for exogeneily of cotton exports are consistent with the independence of cotton from the other two commodities. These findings are corroborated by estimates of a restricted error-correction model which lead to acceptance of the hypothesis that cocoa and coffee exports are-indeed determined endogenously to the system and not linked to cotton exports. Statistical significance of the error-correction terms for cocoa and coffee validates the existence of an equilibrium relationship among the variables in each of these co-integrating vectors. The combined short run dynamic effect of lagged quantities of cocoa and coffee, export/domestic price ratio and GDP jointly explain changes in exports of cocoa whereas lagged quantities exported do not seem to have a significant short-run dynamic effect on changes in coffee exports.     

Asymmetric price transmission in the Spanish lamb sector

This article investigates the non-linear adjustment betweenfarm and retail prices in the lamb sector in Spain, using athree-regime Threshold Autoregressive Model. The results indicatethat, in the long run, price transmission is perfect and anysupply or demand shocks are fully transmitted along the marketingchain. In the short run, price adjustments between the farmand the retail levels are asymmetric and reveal a demand-pulltransmission mechanism. On the other hand, retailers benefitfrom any shock, whether positive or negative, that affects supplyor demand conditions.     

Cross country maize market linkages in Africa: integration and price transmission across local and global markets

In order to study short‐run price shock propagation, we model twenty seven Sub‐Saharan Africa (SSA) domestic maize markets within a Global Vector Autoregression framework. The main purpose is to fully embed multilateral trade flows as a way to better structure local price transmission dynamics and interdependencies, and get a more comprehensive picture of food price shocks propagation. We found significant between‐country market contagion and prompt regional price shock propagation when trade connection exists. Yet, the integration of SSA domestic maize markets within the continent and with global markets remains generally weak. Furthermore, under regular market conditions, most local price series appear to be more responsive to regional neighbors than to global shocks.     

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.     

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.     

我国应对国际原油价格上涨对策研究

自2003年以来,国际原油价格走势一直高涨。石油作为一种对经济发展至关重要的不可再生资源,对我国经济起着无可替代的作用。石油价格上涨通过影响消费、投资和出口最终对我国国民经济产生重大的冲击。我国应对石油价格上涨的对策主要是从稳定石油的正常供给和稳定石油需求两方面入手,建立并实行国家石油安全战略和开放石油期货市场应成为我国近期的两大重要举措。     

The impact of OECD biofuels policies on developing countries

OECD countries’ biofuels policies, derived from energy and environmental legislation and activated by high oil prices, were the primary cause of not only the sudden spike in grain and oilseed prices in 2007–2008 but also of the ensuing price volatility. Even though developing countries have a comparative advantage in biofuels production, they were shut out of rich countries’ biofuel markets by trade discriminating biofuels policies. Developing countries would not have been able to take full advantage of the price spike in the short run anyway given the low supply elasticities and the long time required for biofuel production to come online, unlike for corn‐ethanol. The controversy over the right price of food is misplaced and policy makers should instead focus on improving biofuels policies, which like their counterpart agricultural policies in previous decades, have damaged the welfare of developing countries.     

Agricultural price transmission elasticity: importance of controlling for unobserved common factors

A voluminous amount of the literature estimates price transmission from world markets to domestic markets ignoring unobserved factors that commonly affect domestic markets. This article reevaluates the long‐run and short‐run transmission elasticity of world food price shocks to domestic markets using a “common factor framework” that takes unobserved common factors that are correlated with regressors into consideration. In the estimation, annual price data for rice, wheat, and maize for a panel of developed and developing countries that are observed over the period of 1960–2007 are used. The results from a common factor framework to those that do not account for common factors are then compared. Our findings suggest that ignorance of common factors is likely to result in upwardly biased elasticity estimates.     

Inter‐ and intra‐seasonal crop acreage response to international food prices and implications of volatility

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. This study makes estimations of monthly (i.e., seasonal) versus annual global acreage response models for the world's principal staple food crops: wheat, corn, soybeans, and rice. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra‐annual acreage elasticity is crucial for expected food supply and for input demand, especially in the light of the recent short‐term volatility in food prices. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short‐run elasticities are about 0.05 to 0.40; price volatility tends to reduce acreage for some of the crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of an essence for acreage response. The analysis indicates that acreage allocation is more sensitive to prices in the northern hemisphere spring than in winter and the response varies across months.     

EXPORT SUPPLY RESPONSE OF THE AUSTRALIAN CITRUS INDUSTRY*

A model of export supply response of the Australian citrus industry is developed and estimated using cointegration and error correction techniques and quarterly data for the period 1983 to 1993. The estimates suggest that, even in the long run, the supply of citrus exports is inelastic with respect to relative price. The results also show that the adjustment of export supply to changes in relative price is not instantaneous, the domestic production capacity has a significant positive impact on export supply, and export supply in the June quarter in each year is significantly lower than in other quarters.     

Fighting global food price rises in the developing world: the response of China and its effect on domestic and world markets

This article addresses how China is being affected by and is responding to the world food crisis. So far, Chinese officials have responded to higher world prices by drawing down stocks and limiting exports of major grains. These policy instruments were not available for soybeans, so domestic prices of soy and other oilseeds have risen with international prices. Using a global CGE model, we show that the initial world price rise was largely due to higher world oil prices and demand for biofuels as opposed to other factors, especially in maize and soybeans. China's response to this shock has kept domestic grain prices low relative to world grain markets and to domestic soybean prices. As grain stocks are depleted, however, demand growth will push domestic prices back into alignment. Anticipating this pressure on consumers and accelerating supply response through public investment will facilitate adjustment.     

Shocks to food market systems: A network approach

In order to better understand how cross-border price shocks are transmitted to domestic food markets, we augment an error correction model with a network approach and apply it to Tanzania. We show the following. First, Dar es Salaam, Tanzania's largest city and port, is not a significant influence. Second, demand shocks emanate primarily from border markets that may serve as conduits for informal trade. Third, market linkages differ considerably across seasons and commodities. Fourth, prices in areas with high production potential are especially sensitive to systemic shocks. More broadly, we show that a network approach in conjunction with time series analysis can enhance our understanding of the origins and channels through which shocks are transmitted to food markets.     

How sensitive is U.S. agricultural trade to the bilateral exchange rate? Evidence from bulk,intermediate, and consumer‐oriented products

This article examines the dynamic effects of changes in bilateral exchange rates on changes in bilateral trade of bulk, intermediate, and consumer‐oriented agricultural products between the United States and its 10 major trading partners. We find that, for consumer‐oriented products, U.S. exports are highly sensitive to bilateral exchange rates in both the short and long run, while U.S. imports are mostly responsive only in the short run. For bulk products, on the other hand, U.S. exports and imports are relatively insensitive to exchange rate changes in both the short and long run. For intermediate products, exports and imports are responsive to exchange rate changes in the short run, but not in the long run. It is also found that income of the United States and its trading partners has a significant effect on U.S. exports and imports of the three types of agricultural products in both the short and long run.     

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.