Do Agricultural Contracts Affect Grain Prices? Evidence from Mexico
AbstractIn the late 80's and early 90's Mexico eliminated minimum price policies of main agricultural commodities and substituted those policies by government operated contract markets. Contracts can help smooth price variations and facilitate risk-sharing but their impact on price levels is uncertain. We simultaneously estimate the impacts of quantity supplied sold via contracts and the cash market on cash prices for grains participating in contracts: wheat, corn, soybeans and sorghum. By doing so we estimate an inverse grain demand function using supply shifters and other exogenous variables as exclusion restrictions. Our findings show that quantity supplied sold via contracts is a more important determinant of prices than quantity supplied in the cash market. A 10 % increase of volume sold via contracts is estimated to reduce cash market prices by 2.5 %. Additionally, we find no evidence that more contracts affect prices by reducing quantity supplied in the cash market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Banco de México in its series Working Papers with number 2012-15.
Date of creation: Dec 2012
Date of revision:
Contracts; Inverse Demand; Three Stage Least Squares; Grains; Supply Shifters.;
Find related papers by JEL classification:
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-01-19 (Agricultural Economics)
- NEP-ALL-2013-01-19 (All new papers)
- NEP-DEV-2013-01-19 (Development)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hayenga, Marvin L., 2000. "Meat Packer Vertical Integration and Contract Linkages in the Beef and Pork Industries: An Economic Perspective," Staff General Research Papers 10564, Iowa State University, Department of Economics.
- Elam, Emmett W., 1992. "Cash Forward Contracting Versus Hedging Of Fed Cattle, And The Impact Of Cash Contracting On Cash Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dirección de Sistemas).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.