A Stochastic Simulation Analysis Of The Effects Of Indian Wheat Production Instability On The World Wheat Market

Stephen Devadoss, Shuangling Li and James Jones

No 305125, A.E. Research Series from University of Idaho, Department of Agricultural Economics and Rural Sociology

Abstract: Adverse weather factors in India augment the instability in wheat supply and trade. Consequently, India's wheat trade is a classic example of stochastic supply being the dominant factor in determining trade flows. This study analyses the effects of random fluctuations in India's wheat supply on domestic and world price variability and trade flows of India and major exporters and importers by using stochastic simulation analysis. Production instability causes price variability of $71 per metric ton under autarky condition. However, price variability is mitigated once trade is allowed. Thus, trade acts as a buffer stock program in reducing price variability. The results show that production shortfalls (surpluses) in India benefit wheat exporters (importers) and hurt importers (exporters).

Keywords: Research Methods/ Statistical Methods; Crop Production/Industries; Demand and Price Analysis; International Relations/Trade (search for similar items in EconPapers)
Pages: 27
Date: 1994-08
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uidaer:305125

DOI: 10.22004/ag.econ.305125

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