IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

What world price?

Listed author(s):
  • Jamora, Nelissa
  • Cramon-Taubadel, Stephan von
Registered author(s):

    There is no consensus on what defines a reference for the world rice price. A review on rice as a differentiated commodity shed two important insights. First, it confirms that few studies have considered segmentation of rice in their price analysis. Second, Thai 5% brokens has often been considered the world reference price for rice but no empirical exercise has been carried out to validate this. This study analyzes the extent of market integration in the international rice market by generating empirical evidence on the cointegration of different export prices. We start our analysis with the assumption that rice is not a homogeneous good. In this context, we establish clusters by rice quality and determine which export markets best represent the world rice price within and across clusters. The study uses 19 monthly average export rice price quotations from January 2000 to July 2012 extracted from the FAO Global Information and Early Warning System food price database and from the Thai Rice Exporters Association. We also include FAO Export Price indices for high and low quality indica to assess their performance with other export prices. Our study contributes to the limited discussion on rice as a heterogeneous commodity. We validate Thai 5% brokens as the benchmark price for rice by examining its bivariate relationships with other export prices. We employ Johansen maximum likelihood procedure to confirm the long-run equilibrium relations and cointegration of price series. Then, we extend the error correction model to a multivariate cointegration analysis by cluster. We test for the Law of One Price, long run exclusion, and weak exogeneity to assess the dynamics of price transmission and determine how prices are related with one another. We build on this information and our knowledge of the rice market system to answer the question – What is the world rice price? We find evidence that the rice market is highly segmented. This suggests that there is no single answer to our research question. While we find that Thai 5% brokens is cointegrated with many other export prices and contributes strongly in defining long run equilibrium relations, there are several international rice prices that could be used as benchmarks. The results imply that failure to find cointegrating relations from world to domestic rice markets can be a result of failure to effectively define the appropriate international reference price. In price transmission analysis, we find that it is imperative to examine the types of rice and to discuss the relevance of specific markets to the benchmark price based on understanding of rice trade structure. This study affirms the importance of having up-to-date and reliable sources of rice prices both in the export and domestic markets, accounting for differences in quality.

    If 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.

    File URL:
    Download Restriction: no

    Paper provided by Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development in its series Discussion Papers with number 142241.

    in new window

    Date of creation: Dec 2012
    Handle: RePEc:ags:gagfdp:142241
    Contact details of provider: Postal:
    Platz der Göttinger Sieben 5, D-37073 Göttingen

    Web page:

    More information through EDIRC

    References listed on IDEAS
    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.:

    in new window

    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Frank Asche & Helge Bremnes & Cathy R. Wessells, 1999. "Product Aggregation, Market Integration, and Relationships between Prices: An Application to World Salmon Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 568-581.
    3. Friederike Greb & Nelissa Jamora & Carolin Mengel & Stephan von Cramon-Taubadel & Nadine Würriehausen, 2012. "Price transmission from international to domestic markets," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 125, Courant Research Centre PEG, revised 08 Oct 2012.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    6. Jayne, Thomas S., 1993. "Sources and Effects of Instability in the World Rice Market," Food Security International Development Papers 54059, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ags:gagfdp:142241. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.