Transmission of Food Price Volatility from International to Domestic Markets: Evidence from Africa, Latin America, and South Asia

Ceballos, Francisco; Hernandez, Manuel A.; Minot, Nicholas; Robles, Miguel

doi:10.1007/978-3-319-28201-5_13

Cited by 10 publications

(9 citation statements)

References 24 publications

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“…The decrease in agricultural market efficiency after the crisis was also reported in other studies. Ceballos et al [ 18 ] analyzed food price volatility transmission (corn, rice, sorghum, and wheat) from international market to markets of developing countries and found that international price volatility is most likely to be transmitted to markets in South America. They also found that except for sorghum, which showed only a moderate increase, volatility for the rest of the commodities increased by more than 30% after the crisis, indicating lower market efficiency.…”

Section: Conclusion and Discussionmentioning

confidence: 99%

“…Agricultural markets show a high level of integration, through price transmission and volatility spillover, and Brazil’s agricultural commodities prices were studied within this context. Ceballos et al [ 18 ] analyzed food price volatility transmission (corn, rice, sorghum, and wheat) from the international market to markets of developing countries and found that international price volatility is most likely to be transmitted to markets in South America. Balcombe et al [ 19 ] verified price transmission of wheat, corn, and soybean between the U.S., Argentina, and Brazil during the end of 1980s and beginning of 1990s, generally with causality flowing from the U.S. and Argentina toward Brazil.…”

Section: Introductionmentioning

confidence: 99%

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Permutation Entropy and Statistical Complexity Analysis of Brazilian Agricultural Commodities

Araujo

Bejan

Rosso

et al. 2019

Entropy

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Agricultural commodities are considered perhaps the most important commodities, as any abrupt increase in food prices has serious consequences on food security and welfare, especially in developing countries. In this work, we analyze predictability of Brazilian agricultural commodity prices during the period after 2007/2008 food crisis. We use information theory based method Complexity/Entropy causality plane (CECP) that was shown to be successful in the analysis of market efficiency and predictability. By estimating information quantifiers permutation entropy and statistical complexity, we associate to each commodity the position in CECP and compare their efficiency (lack of predictability) using the deviation from a random process. Coffee market shows highest efficiency (lowest predictability) while pork market shows lowest efficiency (highest predictability). By analyzing temporal evolution of commodities in the complexity–entropy causality plane, we observe that during the analyzed period (after 2007/2008 crisis) the efficiency of cotton, rice, and cattle markets increases, the soybeans market shows the decrease in efficiency until 2012, followed by the lower predictability and the increase of efficiency, while most commodities (8 out of total 12) exhibit relatively stable efficiency, indicating increased market integration in post-crisis period.

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Section: Conclusion and Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Permutation Entropy and Statistical Complexity Analysis of Brazilian Agricultural Commodities

Araujo

Bejan

Rosso

et al. 2019

Entropy

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“…Therefore, imports could help to reduce domestic price instability by supplementing domestic markets at times of adverse domestic supply shocks. However, imports also increase the vulnerability of domestic markets to supply shocks originated overseas (Puma et al 2015, Ceballos et al 2016, d'Amour et al 2016, Gephart et al 2016, Marchand et al 2016, Seekell et al 2017, a possibility exacerbated by the fact that agricultural exports of main staples are concentrated in a handful of countries like the US (Brooks et al 2013, d'Amour et al 2016, Challinor et al 2017.…”

Section: Introductionmentioning

confidence: 99%

Climate shocks, food price stability and international trade: evidence from 76 maize markets in 27 net-importing countries

Chen

Villoria

2019

Environ. Res. Lett.

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Do food imports increase the variability of domestic food prices? The answer to this question depends on whether foreign production is more volatile than domestic production. If imports are likely to destabilize domestic prices, storing crops for future consumption may prove an appealing strategy to cope with the adverse supply effects of a more unstable climate. Unfortunately, public storage has proven to be unsustainable due to the high costs of carrying crop inventories over time and the inability of policy planners to correctly forecast changes in domestic supply. Therefore, understanding the roles of imports and stocks on domestic food price instability is important as domestic shortfalls in food production are likely to become more frequent as the world's climate becomes warmer. Using maize prices observed in 76 maize markets of 27 maize net importers across Africa, Asia and Latin America during 2000-2015, we find that, on average, a 1% increase in the ratio of imports to total consumption is correlated with a 0.29% reduction of the intra-annual coefficient of variation of maize prices; likewise a 1% increase in the amount of maize available in stocks at the beginning of the season is correlated with a 0.22% reduction in the said coefficient. We also find that climate-induced supply shocks toward mid-century may increase maize price variability in the focus countries by around 10%; these increases could be offset with similar increases in the ratio of imports to total consumption or in the stock-to-use ratio at the beginning of the crop marketing year. The fact that both imports and stocks help to stabilize domestic prices suggests that their uses should hinge on a careful cost-benefit analysis, including the risk of facing world production more variable than domestic production and the costs of carrying maize inventories over time.

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“…With the recently developed multivariate GARCH (MGARCH) models, it has been possible to determine the volatility across markets and to increase these practices in agricultural markets in a rapid way. Acording to this, Ceballos et al (2016) have studied the volatility for 41 different market prices in 27 developing countries among the grain markets of the world. They found that the corn prices were more volatile than rice and wheat prices and the prices of Africa were more volatile than the prices in Latin America and South Asia.…”

Section: Introductionmentioning

confidence: 99%

Price Volatility Transmission Among Cereal Markets. The Evidences for Turkey

Çınar¹

2018

New Medit

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The purpose of this study is to examine the price volatilities in corn, wheat and barley markets in Turkey, and to analyze the volatility transmission across the prices of these commodities. The Baba-Engle-Kraft-Kroner (BEKK) version of the multivariate Generalized Autoregressive Heteroskedastic (MGARCH) method was used to evaluate the conditional correlations and the time variation of the volatilities of the prices of the selected products on a monthly basis. The analysis period covers the timeframe between January 2003 and August 2017. The findings of the BEKK MGARCH model provide evidence that there is a one-way, strong and permanent volatility spillover from the corn and barley market to the wheat market. In addition, the findings of the conditional correlation analysis show that the wheat and feed market interdependence has increased to this extent for the first time since the global crisis. The results reveal that monitoring the livestock and feed policies in order to eliminate the problems in the wheat market would be beneficial. This study may be useful in designing better risk management tools for Turkish agriculture.

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Transmission of Food Price Volatility from International to Domestic Markets: Evidence from Africa, Latin America, and South Asia

Cited by 10 publications

References 24 publications

Permutation Entropy and Statistical Complexity Analysis of Brazilian Agricultural Commodities

Permutation Entropy and Statistical Complexity Analysis of Brazilian Agricultural Commodities

Climate shocks, food price stability and international trade: evidence from 76 maize markets in 27 net-importing countries

Price Volatility Transmission Among Cereal Markets. The Evidences for Turkey

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