Price relations between international rice markets

Abstract

International rice markets are seen as volatile due to the thin nature of the market which is believed to be exacerbated by a low level of substitution between major rice export markets. In other words, this perceived lack of price transmission amongst international rice markets is believed to further thin out an already thin world rice market. The paper tests for price transmission between five major rice exporting markets representing Asia and the Americas over the past decade. It uses a vector autoregressive framework and performs Granger and Toda-Yamamoto causality tests and generalized impulse response functions to interpret the model's results. The findings suggest that price transmission exists across these major rice export markets with price relations being the most widespread between Asian markets. Furthermore, the direction of price transmission suggests that Asian prices act as price leaders for North and South American prices. While it is not clear whether there is a price leader amongst the Asian export markets, Vietnam has the most extensive price relations with other export markets which would suggest that the Vietnamese rice export price is a more suitable world reference price than the Thai export price. An implication of the presence of price relations between rice export markets is that the world rice market is not as fragmented as generally perceived in the literature. However, it can also explain why international rice prices are so sensitive to the volatile trading behavior of major markets.

Price transmission and volatility spillovers in Asian rice markets: Evidence from MGARCH and panel GARCH models

“…Instead of the Thai export price as a measure of the world price, we have also considered the export prices of the equivalent quality rice from Vietnam and Pakistan. Ghoshray (2008) and John (2014) show evidence of Granger causality from Vietnamese and Pakistani rice prices to the Thai rice price, although we found opposite results with our sample period that is different from those earlier studies. Nonetheless, we have found that regression results are overall robust to alternative proxies for the world price.…”

Market implications of the integration scenario of Southeast Asian rice markets

“…Thailand acts as a price leader in the global rice market (Ghoshray, 2008). Prices for indica and japonica varieties may move somewhat independently of one another in the short term, because of limited substitutability in consumption among the different varieties and qualities (John 2014, Rastegari-Henneberry 1985, Jayne 1993. However, in the long term, the prices of indica and japonica varieties move in parallel.…”

El precio mundial del café y su efecto en el precio minorista del café para las cinco ciudades principales de Colombia

“…En otras palabras, dada la posibilidad de arbitraje, la diferencia entre el precio del bien X en el mercado 1 (p 1t ) y el precio de ese mismo bien en el mercado 2 (p 2t ) debe ser igual al costo de transferir el producto de un mercado a otro (c) (John, 2014). En su forma débil, esa diferencia debe ser, en valor absoluto, menor o igual al costo de transacción.…”