[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/ags/aareaj/343032.html
   My bibliography  Save this article

The impacts of price insulation on world wheat markets during the 2022 food price crisis

Author

Listed:
  • Martin, Will
  • Minot, Nicholas
Abstract
This paper begins with a survey of recent commodity price developments that highlights the magnitude of this price surge and identifies the rapid rise in wheat prices as a key element. The analysis in this paper focuses on the extent to which domestic markets are insulated from these changes and on the resulting impacts on world prices. An econometric analysis using error-correction models finds stable long-term relationships between world wheat prices and most domestic prices of wheat and wheat products, but with considerable variation across countries in the rate of price transmission. A case study of the price shocks during the COVID-19 pandemic and the Ukraine food price crisis finds that price insulation roughly doubled the overall increase in world wheat prices and raised their volatility both during periods of price increase and price decline.

Suggested Citation

  • Martin, Will & Minot, Nicholas, 2022. "The impacts of price insulation on world wheat markets during the 2022 food price crisis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(04), January.
    • Handle: RePEc:ags:aareaj:343032
    DOI: 10.22004/ag.econ.343032
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/343032/files/The%20impacts%20of%20price%20insulation.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.343032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 1-23.
    2. Hans G. Jensen & Kym Anderson, 2017. "Grain Price Spikes and Beggar-thy-Neighbor Policy Responses: A Global Economywide Analysis," The World Bank Economic Review, World Bank, vol. 31(1), pages 158-175.
    3. Stephan Pfaffenzeller & Paul Newbold & Anthony Rayner, 2007. "A Short Note on Updating the Grilli and Yang Commodity Price Index," The World Bank Economic Review, World Bank, vol. 21(1), pages 151-163.
    4. Deepak Bhattasali & Shantong Li & Will Martin, 2004. "China and the WTO : Accession, Policy Reform, and Poverty Reduction Strategies," World Bank Publications - Books, The World Bank Group, number 14920.
    5. Awudu Abdulai, 2002. "Using threshold cointegration to estimate asymmetric price transmission in the Swiss pork market," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 679-687.
    6. Harriss, Barbara, 1979. "There is Method in My Madness: Or is it Vice Versa? Measuring Agricultural Market Performance," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 17(2), pages 1-22.
    7. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    8. Van Campenhout, Bjorn, 2007. "Modelling trends in food market integration: Method and an application to Tanzanian maize markets," Food Policy, Elsevier, vol. 32(1), pages 112-127, February.
    9. Stephan von Cramon-Taubadel & Barry K. Goodwin, 2021. "Price Transmission in Agricultural Markets," Annual Review of Resource Economics, Annual Reviews, vol. 13(1), pages 65-84, October.
    10. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
    11. Christophe Gouel & Madhur Gautam & Will J. Martin, 2016. "Managing food price volatility in a large open country: the case of wheat in India," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 811-835.
    12. Helmut Lütkepohl, 2005. "New Introduction to Multiple Time Series Analysis," Springer Books, Springer, number 978-3-540-27752-1, December.
    13. Kym Anderson & Maros Ivanic & William J. Martin, 2014. "Food Price Spikes, Price Insulation, and Poverty," NBER Chapters, in: The Economics of Food Price Volatility, pages 311-339, National Bureau of Economic Research, Inc.
    14. Martin Ravallion, 1986. "Testing Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 102-109.
    15. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    16. Giordani, Paolo E. & Rocha, Nadia & Ruta, Michele, 2016. "Food prices and the multiplier effect of trade policy," Journal of International Economics, Elsevier, vol. 101(C), pages 102-122.
    17. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," The World Bank Economic Review, World Bank, vol. 2(1), pages 1-47, January.
    18. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    19. Neelam Ejaz & Maha Ahmad, 2017. "Distortions to Agricultural Incentives in Light of Trade Policy," World Bank Publications - Reports 31349, The World Bank Group.
    20. Ivanic, Maros & Martin, Will, 2014. "Implications of domestic price insulation for global food price behavior," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 272-288.
    21. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    22. Baquedano, Felix G. & Liefert, William M., 2014. "Market integration and price transmission in consumer markets of developing countries," Food Policy, Elsevier, vol. 44(C), pages 103-114.
    23. Thibault Fally & James Sayre, 2018. "Commodity Trade Matters," 2018 Meeting Papers 172, Society for Economic Dynamics.
    24. Christine Moser & Christopher Barrett & Bart Minten, 2009. "Spatial integration at multiple scales: rice markets in Madagascar," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 281-294, May.
    25. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-129, May.
    26. Asfaw Negassa & Robert J. Myers, 2007. "Estimating Policy Effects on Spatial Market Efficiency: An Extension to the Parity Bounds Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 338-352.
    27. Robert J. Myers & T.S. Jayne, 2012. "Multiple-Regime Spatial Price Transmission with an Application to Maize Markets in Southern Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 174-188.
    28. Michael J. Roberts & Wolfram Schlenker, 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," American Economic Review, American Economic Association, vol. 103(6), pages 2265-2295, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ags:aaea22:335666 is not listed on IDEAS
    2. Hoffmann, Clemens & Kastens, Lina & vPortugal-Perez, Alberto & von Cramon-Taubadel, Stephan, 2024. "Trade policies and the transmission of international to domestic prices," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344313, International Association of Agricultural Economists (IAAE).
    3. Jayson Beckman & Noé J. Nava & Angelica S. Williams & Steven Zahniser, 2024. "Land competition and welfare effects from Mexico's proposal to ban genetically engineered corn," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 1300-1325, May.
    4. Lenka Novotná & Zuzana Rowland & Svatopluk Janek, 2023. "Impacts of the war on prices of Ukrainian wheat," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(10), pages 404-415.
    5. Mohamad B. Karaki & Andrios Neaimeh, 2024. "Do higher global oil and wheat prices matter for the wheat flour price in Lebanon?," Agricultural Economics, International Association of Agricultural Economists, vol. 55(4), pages 559-571, July.
    6. Daniel Hyun & Jacky Lee, 2023. "Variations in Pass-Through from Global Agricultural Commodity Prices to Domestic Food Inflation," Discussion Papers 2023-24, Bank of Canada.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin, Will & Minot, Nicholas, 2023. "The impact of price insulation on world wheat markets during Covid-19 and the Ukraine crisis," IFPRI discussion papers 2175, International Food Policy Research Institute (IFPRI).
    2. Guillaume Pierre & Jonathan Kaminski, 2019. "Cross country maize market linkages in Africa: integration and price transmission across local and global markets," Agricultural Economics, International Association of Agricultural Economists, vol. 50(1), pages 79-90, January.
    3. Minot, Nicholas, 2011. "Transmission of world food price changes to markets in Sub-Saharan Africa:," IFPRI discussion papers 1059, International Food Policy Research Institute (IFPRI).
    4. Elleby, Christian, 2014. "Poverty and Price Transmission," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182722, European Association of Agricultural Economists.
    5. Burke, William J. & Myers, Robert J., 2014. "Spatial equilibrium and price transmission between Southern African maize markets connected by informal trade," Food Policy, Elsevier, vol. 49(P1), pages 59-70.
    6. Ma, Meilin & Delgado, Michael S. & Wang, H. Holly, 2024. "Risk, arbitrage, and spatial price relationships: Insights from China's hog market under the African Swine Fever," Journal of Development Economics, Elsevier, vol. 166(C).
    7. Christiane Baumeister & Lutz Kilian, 2014. "Do oil price increases cause higher food prices? [Biofuels, binding constraints, and agricultural commodity price volatility]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 29(80), pages 691-747.
    8. Gabriela Simonet & Julie Subervie & Driss Ezzine-De-Blas & Marina Cromberg & Amy Duchelle, 2015. "Paying smallholders not to cut down the amazon forest: impact evaluation of a REDD+ pilot project," Working Papers 1514, Chaire Economie du climat.
    9. Isaac Abunyuwah & Henry De-Graft Acquah, 2013. "Modelling non-linear Spatial Market Integration and Equilibrium Processes in Hidden Markov Framework," Journal of Economics and Behavioral Studies, AMH International, vol. 5(8), pages 535-545.
    10. Christophe Gouel & Nicolas Legrand, 2017. "Estimating the Competitive Storage Model with Trending Commodity Prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(4), pages 744-763, June.
    11. Winkelried, Diego, 2021. "Unit roots in real primary commodity prices? A meta-analysis of the Grilli and Yang data set," Journal of Commodity Markets, Elsevier, vol. 23(C).
    12. Winkelried, Diego, 2018. "Unit roots, flexible trends, and the Prebisch-Singer hypothesis," Journal of Development Economics, Elsevier, vol. 132(C), pages 1-17.
    13. Pieters, Hannah & Swinnen, Johan, 2016. "Trading-off volatility and distortions? Food policy during price spikes," Food Policy, Elsevier, vol. 61(C), pages 27-39.
    14. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    15. A Ghoshray & Ashira Perera, 2011. "The Model of Commodity Prices after Sir Arthur Lewis Revisited," Department of Economics Working Papers 08/11, University of Bath, Department of Economics.
    16. Rahman, Mohammad Chhiddikur, 2020. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 242248, September.
    17. Estrades, Carmen, 2015. "The Role of Export Restrictions in Agriculture Trade," 2015: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229229, International Agricultural Trade Research Consortium.
    18. Martin, William J., 2012. "Managing High and Volatile Food Prices," Trade Issues Papers 142732, International Agricultural Trade Research Consortium.
    19. Ivanic, Maros & Martin, Will, 2014. "Implications of domestic price insulation for global food price behavior," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 272-288.
    20. Ivanic, Maros & Martin, Will, 2014. "Poverty impacts of the volume-based special safeguard mechanism," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(4), October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aareaj:343032. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.