International market information and agricultural commodity price dynamics
Journal of Agribusiness in Developing and Emerging Economies
ISSN: 2044-0839
Article publication date: 15 September 2022
Issue publication date: 25 March 2024
Abstract
Purpose
This study aims to investigate the role of international price volatility and inventories on domestic market price dynamics in the case of agricultural commodities.
Design/methodology/approach
A structural model is employed to uncover relationships among commodity price, price volatility, inventories and convenience yield. Monthly producer price data along with annual data on trade, consumption, inventories and tariffs for 71 countries and 13 commodities covering 2010–2019 are assembled to estimate the model. With a first-stage Least Absolute Shrinkage and Selection Operator (LASSO) estimator to identify the best instrument set, a nonlinear approach is used to estimate the model.
Findings
Results show that international market information plays a critical role in domestic market price dynamics. International price volatility has a stronger effect on domestic prices than that of international inventories.
Research limitations/implications
Current upheaval in commodity markets requires an understanding of how prices move together and inventories affect that movement. A country's internal price is not independent of the effects of global market events.
Originality/value
Although hypotheses exist that global market information (volatility and inventories) helps countries manage domestic commodity prices, there have been limited studies on this relationship, especially with a structured model and cross-country data.
Keywords
Acknowledgements
Gopinath acknowledges support from the UGA Agricultural Experiment Station and the Distinguished Professorship in Agricultural Marketing.
Citation
Jeong, S. and Gopinath, M. (2024), "International market information and agricultural commodity price dynamics", Journal of Agribusiness in Developing and Emerging Economies, Vol. 14 No. 2, pp. 376-392. https://doi.org/10.1108/JADEE-06-2022-0126
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited