Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-25T08:07:16.576Z Has data issue: false hasContentIssue false
  • English
  • Français

Market Delineation and Price Leadership in the World Wheat Market: A Cointegration Analysis

Published online by Cambridge University Press:  15 September 2016

Atanu Ghoshray
Atanu Ghoshray*
Affiliation:
Economics in the Department of Economics and International Development at the University of Bath in Bath, England
Get access

Abstract

Wheat types may be classified according to strength, a baking characteristic. Since the demand for wheat is derived demand, the baking characteristic is directly related to end use. Accordingly, the wheat classes that are used in this study are divided into sub-groups according to strength, that is, strong, medium, and weak wheats. Time-series methods are employed to determine how the different classes of wheats are related within each sub-group. The different wheats under the different sub-groups are found to be substitutes to various degrees, but form a robust cointegrating relationship, implying that the wheat prices in these markets are bound together by a long-term equilibrium relationship. Within each of the sub-groups, the U.S. wheats were found to act as a price leader, driving the prices of other wheats belonging in the same sub-group. These U. S. wheats were found to form no long-run relationship between each other given their distinct end uses. The study highlights the importance of differentiating wheat by end use to specify price linkages more accurately.

Keywords

cointegrationwheatprice leadershipmarket segmentation
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 35 , Issue 2 , October 2006 , pp. 311 - 326
Copyright
Copyright © 2006 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alaouze, C. M., Watson, A. S., and Sturgess, H. N. 1978. “Oligopoly Pricing in the World Wheat Market.” American Journal of Agricultural Economics 60(2): 173–185.Google Scholar
Antle, J. M., and Smith, V. H. 1999. “An Overview of World Wheat Markets” In Antle, J. M. and Smith, V. H., eds., The Economics of World Wheat Markets. Wallingford, UK: CAB International.Google Scholar
Asche, F., Bremnes, H., and Wessells, C. R. 1999 “Product Aggregation, Market Integration and Relationships Between Prices: An Application to World Salmon Markets.” American Journal of Agricultural Economics 81(3): 568–581.Google Scholar
Asche, F., Salvanes, K. G., and Steen, F. 1997. “Market Delineation and Demand Structure.” American Journal of Agricultural Economics 79(1): 139–150.Google Scholar
Benson, B. L. and Faminow, M. D. 1990. “Integration of Spatial Markets.” American Journal of Agricultural Economics 72(1): 49–62.Google Scholar
Bessler, D.A., Jian, Y., and Wongcharupan, M. 2003. “Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs.” Journal of Regional Science 43(1): 1–33.Google Scholar
Bose, S., and McIlgrom, A. 1996. “Substitutability Among Species in the Japanese Tuna Market: A Cointegration Analysis.” Marine Resource Economics 11(3): 143–156.Google Scholar
Brooks, H. G., Devadoss, S., and Meyers, W. H. 1990. “The Impact of the U. S. Wheat Export Enhancement Program on the World Wheat Market.” Canadian Journal of Agricultural Economics 38(2): 253–277.Google Scholar
Cournot, A.A. 1971. Researches into the Mathematical Principles of the Theory of Wealth. New York: A. M. Kelly.Google Scholar
Diakosavvas, D. 1995. “How Integrated Are World Beef Markets? The Case of Australian and U. S. Beef Markets.” Agricultural Economics 12(1): 37–53.CrossRefGoogle Scholar
Ghoshray, A. 2002. “Asymmetric Price Adjustment and the World Wheat Market.” Journal of Agricultural Economics 53(2): 299–317.Google Scholar
Goodwin, B. 1992. “Multivariate Cointegration Tests and the Law of One Price in International Wheat Markets.” Review of Agricultural Economics 14(1): 117–124.Google Scholar
Goodwin, B. K., Grennes, T.J., and Wohlgenant, M. K. 1990. “A Revised Test of the Law of One Price Using Rational Price Expectations.” American Journal of Agricultural Economics 72(3): 682–693.CrossRefGoogle Scholar
Goodwin, B. K., and Schroeder, T. C. 1991. “Price Dynamics in International Wheat Markets.” Canadian Journal of Agricultural Economics 39(2): 237–254.CrossRefGoogle Scholar
Halverson, J., and Zeleny, L. 1988. “Criteria of Wheat Quality.” In Pomeranz, Y., ed., Wheat: Chemistry and Technology (Vol. 1) (3rd edition). St. Paul, Minnesota: American Association of Cereal Chemists.Google Scholar
Hendry, D. 1995. Dynamic Econometrics. Oxford, UK: Oxford University Press.Google Scholar
Hyberg, B., Ash, M., Lin, W., Lin, C., Aldrich, L., and Pace, D. 1993. “Economic Implications of Cleaning Wheat in the United States.” Agricultural Economics Report No. 669, Economic Research Service, U. S. Department of Agriculture, Washington D. C.Google Scholar
Johansen, S. 1988 “Statistical Analysis of Cointegrating Vectors.” Journal of Economic Dynamics and Control 12(2/3): 231–254.Google Scholar
Johansen, S., and Juselius, K. 1992. “Testing Structural Hypothesis in a Multivariate Cointegration Analysis of the PPP and the UIP for UK.” Journal of Econometrics 53(1/3): 211–244.Google Scholar
Kent, N. L., and Evers, A.D. 1994. Technology of Cereals: An Introduction for Students of Food Science and Agriculture (4th edition). Oxford: Pergamon: Oxford. Google Scholar
Kolstad, C. D., and Burris, A. E. 1986. “Imperfectly Competitive Equilibria in International Commodity Markets.” American Journal of Agricultural Economics 68(1): 27–36.Google Scholar
Larue, B. 1991. “Is Wheat a Homogenous Product?” Canadian Journal of Agricultural Economics 39(1): 103–117.Google Scholar
Lloyd, T.A., Rayner, A.J., McCorriston, S., and Morgan, C. W. 2001. “The Impact of Food Scares on Price Adjustment in the UK Beef Market.” Agricultural Economics 25(2/3): 347–357.Google Scholar
MacLaren, D. 1999. “Negotiating Priorities for Wheat.” In Young, L. M., Johnson, J. B., and Smith, V.H., eds., 2000 WTO Negotiations: Issues for Agriculture in the Plains and Northern Rockies. Bozeman, MT: Trade Research Center, Montana State University.Google Scholar
Marshall, A. 1890. Principles of Economics. London: Macmillan.Google Scholar
McCalla, A. F. 1966. “A Duopoly Model of World Wheat Pricing.” Journal of Farm Economics 48(3): 711–727.CrossRefGoogle Scholar
Mercier, S. 1993. “The Role of Quality in Wheat Import Decision Making.” Agricultural Economics Report No. 670, Economic Research Service, U. S. Department of Agriculture, Washington, D. C.Google Scholar
Mohanty, S., and Langley, S. 2003. “The Effects of Policy Regimes in the Integration of North American Grain Markets.” Canadian Journal of Agricultural Economics 51(1): 109–120.CrossRefGoogle Scholar
Mohanty, S., Meyers, W. H., and Smith, D. B. 1999. “A Reexamination of Price Dynamics in the International Wheat Market.” Canadian Journal of Agricultural Economics 47(1): 27–29.Google Scholar
Mohanty, S., Peterson, E.W.F., and Kruse, N. C. 1995. “Price Asymmetry in the International Wheat Market.” Canadian Journal of Agricultural Economics 43(3): 355–365.Google Scholar
Mohanty, S., Peterson, E.W.F., and Smith, D. B. 1996. “Relationships between U. S. and Canadian Wheat Prices: Cointegration and Error Correction Approach.” Canadian Journal of Agricultural Economics 44(3): 265–276.CrossRefGoogle Scholar
Morris, C. F., and Rose, S. P. 1996. “Wheat.” In Henry, R.J. and Kettlewell, P. S., eds., Cereal Grain Quality. London: Chapman & Hall.Google Scholar
Officer, L. 1989. “The Law of One Price: Two Levels of Aggregation.” In Grennes, T., ed., International Financial Markets and Agricultural Trade. Boulder, CO: Westview Press.Google Scholar
Paarlberg, P. L., and Abbott, P. C. 1986. “Oligopolistic Trade Behavior of Public Agencies in International Trade: The World Wheat Market.” American Journal of Agricultural Economics 68(3): 528–542.Google Scholar
Smith, V., Goodwin, B. K., and Holt, M. T. 1995. “Price Leadership in International Wheat Markets.” Report prepared for the Wheat Export Trade Education Committee, Washington, D. C.Google Scholar
Spriggs, J., Kaylen, M., and Bessler, D. 1982. “The Lead-Lag Relationship Between Canadian and U. S. Wheat Prices.” American Journal of Agricultural Economics 64(3): 569–572.Google Scholar
Stigler, G. J. 1987. The Theory of Price. London: MacMillan.Google Scholar
Stigler, G. J., and Sherwin, R.A. 1985. “The Extent of the Market.” Journal of Law and Economics 28(3): 555–586.Google Scholar
Sumner, D.A., and Boltuck, R. 2001. “Anatomy of the Global Wheat Market and the Role of the Canadian Wheat Board.” Report prepared for the Canadian Wheat Board (CWB), Winnepeg, Canada.Google Scholar
Thursby, M. C., and Thursby, J. G. 1990. “Strategic Trade Theory and Agricultural Markets: An Application to Canadian and U. S. Wheat Exports to Japan.” In Carter, C., McCalla, A., and Sharples, J., eds., Imperfect Competition and Political Economy. Boulder, CO: Westview Press.Google Scholar
U. S. Department of Agriculture. 1999. “U.S.-Canada Wheat Trade: The Intersection of Geography and Economics.” Agricultural Outlook (June/July). Economic Research Service, USDA, Washington, D. C. Google Scholar
Veeman, M. 1987. “Hedonic Price Functions for Wheat in the World Market: Implications for the Canadian Wheat Export Strategy.” Canadian Journal of Agricultural Economics 35(4): 535–552.CrossRefGoogle Scholar
von Cramon-Taubadel, S., and Loy, J. 1996. “Price Asymmetry in the International Wheat Market: Comment.” Canadian Journal of Agricultural Economics 44(3): 311–317.CrossRefGoogle Scholar
Wilson, W. W. 1989. “Differentiation and Implicit Prices in Export Wheat Markets.” Western Journal of Agricultural Economics 14(1): 67–77.Google Scholar