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The Cost-Price Squeeze in Agriculture: An Application of Cointegration

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  • Charles B. Moss

Abstract

In the mid and late 1970's, the United States experienced severe inflation. During this period, it was hypothesized that agricultural input prices responded more readily to inflation than agricultural output prices (the cost-price squeeze). This study reexamines the evidence on the cost-price squeeze using recent advances in time series analysis. Preliminary results indicate that prices paid by farmers and prices received by farmers are not cointegrated, suggesting that the cost-price squeeze cannot be ruled out in the long run. The study then tests a multivariate form of the cointegration hypothesis. Results indicate that the divergence between prices paid and prices received is explained by forces outside of agriculture.

Suggested Citation

  • Charles B. Moss, 1992. "The Cost-Price Squeeze in Agriculture: An Application of Cointegration," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 14(2), pages 205-213.
    • Handle: RePEc:oup:revage:v:14:y:1992:i:2:p:205-213.
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    File URL: http://hdl.handle.net/10.2307/1349500
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    Cited by:

    1. Moss, Charles B., 2006. "Valuing State-Level Funding for Research: Results for Florida," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(1), pages 1-15, April.
    2. Liang, Chyi-Lyi (Kathleen) & Feuz, Dillon M. & Taylor, R. Garth, 1997. "Cointegration Tests of Spatial and Variety Price Linkages in Regional Dry Bean Markets," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35787, Western Agricultural Economics Association.
    3. Christos P. Pappas & Christos T. Papadas, 2015. "Farm Production Costs, Producer Prices and Retail Food Prices in Greece: A Cointegration Analysis," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(2), pages 127-143, December.
    4. Campiche, Jody L. & Bryant, Henry L. & Richardson, James W. & Outlaw, Joe L., 2006. "An Analysis of Cointegration: Investigation of the Cost-Price Squeeze in Agriculture," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35357, Southern Agricultural Economics Association.
    5. Ramirez, Octavio A. & Fadiga, Mohamadou L., 2003. "Forecasting Agricultural Commodity Prices with Asymmetric-Error GARCH Models," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(1), pages 1-15, April.
    6. Nikolaos Dritsakis & Antonios Adamopoulos, 2004. "The Causal Relationship Between Domestic Private Consumption and Wholesale Prices: The Case of European Union," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 53-64.
    7. Czyżewski, Bazyli & Matuszczak, Anna, 2016. "Determinanty nożyc cen w rolnictwie krajów Unii Europejskiej o zróżnicowanej strukturze agrarnej," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 3(172), January.
    8. Efstratios Loizou & Kostandinos Mattas & Angelos Pagoulatos, 1997. "Macro-monetary effects on agricultural prices: the case of Greek agriculture," Applied Economics Letters, Taylor & Francis Journals, vol. 4(7), pages 397-400.
    9. Tabakis, Nikolaos M., 2001. "A Multivariate Model for the Relationship Between Agricultural Prices and Inflation Uncertainty: Evidence Using Greek Data," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 2(1), pages 1-11, January.

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