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Have Recent Increases in International Cereal Prices Been Transmitted to Domestic Economies? The experience in seven large Asian countries

Listed author(s):
  • David Dawe

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

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    International cereal prices (in US dollar terms) have been increasing since 2003, but it is domestic prices that affect food consumption and production. This paper analyzes, for seven large Asian countries, the extent to which domestic prices have increased since 2003 and presents several conclusions. First, the data show that the increases in world cereal prices have been accompanied by a real depreciation of the US dollar. For many countries (but not all), this depreciation has neutralized a substantial proportion of the increase in world prices. Second, domestic commodity specific policies in several of these Asian countries have further stabilized domestic prices relative to the change in world prices. This has been especially true for rice, the main staple food in the region, but it is also true for wheat. On average, through the end of 2007, the increase in real domestic rice prices was about one-third of the increase in real US dollar world market rice prices. Third, for the specific cases analyzed here, producer or farmgate prices have changed by approximately the same percentage as consumer prices. Thus, in these Asian countries, domestic markets seem to be transmitting price changes between farmers and consumers rather efficiently. Fourth, the experience with urea fertilizer prices is more heterogeneous: some countries are following free trade, while others have stabilized prices in nominal terms.

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    Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number 08-03.

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    Length: 12 pages
    Date of creation: 2008
    Handle: RePEc:fao:wpaper:0803
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    1. Warr, Peter G., 2005. "Food policy and poverty in Indonesia: a general equilibrium analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(4), December.
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