Long-Run Price Risk In U.S. Agricultural Markets
The last three years have realized significant structural changes in the U.S. agricultural policy environment. These changes include nearly complete planting flexibility and the elimination of target-price-based income support for agricultural producers. Many have questioned the extent to which such policy changes may influence the variability of agricultural prices. This analysis uses price series dating from 1944 to develop a multivariate framework to evaluate the long-run (inter-season) determinants of endogenous variability for the prices of corn, wheat, and soybeans. An annual measure of price variability is calculated from monthly spot market cash prices for each of the three commodities. The generalized method of moments estimation technique is used to model the price variability measure as a function of several supply and demand variables hypothesized to be relevant. Several explicit policy variables are tested for their effect on output price variability as well as on the variable parameter estimates. Output price variability is found to be sensitive to stocks, demand shocks, yield shocks, input price variability, and policy factors. Results vary somewhat for corn, wheat, and soybeans. Implications for recent farm policy changes are offered.
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- Heifner, Richard G. & Kinoshita, Randal, 1994. "Differences Among Commodities in Real Price Variability and Drift," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 3.
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- Ray, Daryll E. & Richardson, James W. & Torre Ugarte, Daniel de la & Tiller, Kelly, 1998.
"Estimating Price Variability In Agriculture: Implications For Decision Makers,"
Journal of Agricultural and Applied Economics,
Southern Agricultural Economics Association, vol. 30(01), July.
- Ray, Daryll E. & Richardson, James W. & De La Torre Ugarte, Daniel G. & Tiller, Kelly H., 1998. "Estimating Price Variability in Agriculture: Implications for Decision Makers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(01), pages 21-33, July.
- Harvey, A C, 1976. "Estimating Regression Models with Multiplicative Heteroscedasticity," Econometrica, Econometric Society, vol. 44(3), pages 461-65, May.
- Collins, Keith J. & Glauber, Joseph W., 1998. "Will Policy Changes Usher In a New Era of Increased Agricultural Market Variability?," Choices, Agricultural and Applied Economics Association, vol. 13(2).
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