E. Moradi; M. Afsharmanesh
Abstract
Introduction
One of the characteristics of agricultural products in Iran is continuous price fluctuations. There are many factors that can lead to fluctuations in prices in the agricultural sector. The important of these factors are the seasonal and cyclical changes in supply, the shift from global ...
Read More
Introduction
One of the characteristics of agricultural products in Iran is continuous price fluctuations. There are many factors that can lead to fluctuations in prices in the agricultural sector. The important of these factors are the seasonal and cyclical changes in supply, the shift from global prices to the domestic market of agricultural products, the shifting of the volatility of inputs into products and the fluctuations caused by the general trend of prices The aim of this study is to evaluate the impact of price shock inputs that are used in the production of corn, on the price of the corn crop. Studies in Iran are further on the transfer of the farm to the retail price and the transmission of price shocks from the inputs market to product market has not been established. To examine this matter, VAR model with panel data was used.
Materials and Methods
For this purpose, we used data on the prices of inputs used in corn production, including land, fertilizer, labor, seed, and pesticides, as well as the price of corn since 1999 to 2012 year, for 16 provinces in Iran. That these provinces produce 93.5 percent of total corn Produced in the country. In order to analyze the data model is specified in the form of PVAR (Vector Auto Regression with Panel Data). Time-series vector auto regression (VAR) models originated in the macro econometric literature as an alternative to multivariate simultaneous equation models. All variables in a VAR system are typically treated as endogenous, although identifying restrictions based on theoretical models or on statistical procedures may be imposed to disentangle the impact of exogenous shocks on the system. To specify the model input price shock impacts the price of corn. The model introduced by Kilian was used as the basis model. According to the study, the effect of input price shocks on the price of corn models was modified.
Results and Discussion
If the shock rise in the price of pesticide, fertilizer, and land to occur each of these shocks separately will increase the price of corn, the effect of these shocks has been moved to later periods. Fertilizers price shocks are long-term and neutralization of this process is very slow. However the impact of price shocks of agricultural pesticides and the land quickly neutralized and this index converges whit corn price. Shock rise in corn prices over a period, Makes the corn prices generally decline in the next period and increase the area under cultivation in the following year, with increasing the area under cultivation may take advantage of economies of scale provided and on the other hand, there is the possibility of commuting buying with more inputs. The effect of all impulses can be said after ten periods, will be neutralized. Only shock that after ten periods are not neutral and it is still its effects visible as the shock of the price of fertilizer. The results showed that the corn price volatility is partly influenced by the price of production inputs.63% of the corn price growth changes related to changing values of its past, 8/4% due to changes in land rental growth, 24% of the change in the growth of the price of fertilizer; 1.5% growth related to changes in the price of seed growth (according to the results of the effect is reversed), and 4.1% related to changes in the growth of prices of agricultural pesticides.
Conclusions
Time of purchase of chemical fertilizers is during planting (phosphate fertilizers) and retention period product (Nitrogen fertilizers).In this sense, it seems that the price of fertilizer and how to increase or decrease is one of the important variables and decision-making (after the price trend of maize) in the formation of corn prices on the market. The ownership structure of the agricultural sector is in such a way that most farmers have their land ownership. The cost of renting land is in the form of implicit costs and not obvious and its role in decision-making between variables is low. The cost of agricultural pesticides in the entire cost of production is not significant and the results show that its role in the formation of corn price changes is small. Organization of market demand and supply and timely distribution of inputs for control market price fluctuations and shocks on inputs market can be effective in stabilizing the price of corn.
M. Shabanzadeh-Khoshrody; A. Mahmoodi; R. Esfanjari Kenari
Abstract
Introduction: Agriculture as one of old sectors of economy has been important role in the supply food for peoples and raw materials. Globalization causes rapid growth of world trade and reduces information and communications costs. Globalization and rapid growth of trade increases the potential benefits ...
Read More
Introduction: Agriculture as one of old sectors of economy has been important role in the supply food for peoples and raw materials. Globalization causes rapid growth of world trade and reduces information and communications costs. Globalization and rapid growth of trade increases the potential benefits of trade for agriculture from various aspects. The potential benefits of trade for agriculture increases from three aspects. Direct increase in the domain of agricultural sector activities for competition in the global market results in the benefits of access to global markets. This is especially true in cases where there is comparative advantage and the indirect effects of increased global trade on non-agricultural sectors that cause the domestic demand for food change from qualitative and quantitative aspects, are the benefits of this event. However, during the process of globalization, how to influence prices in different markets, including the impact of world prices on domestic prices is an important issue in trade policy analysis. During this process domestic prices are directly related to world prices. With this approach, the main objective of this study is to examine the effect of world price transfers to domestic markets for sensitive and certain agricultural products in Iran during 1360-91.
Materials and Methods: To achieve this goal in this study, the Armington and the foreign currency elasticity of ten selected agricultural products in Iran including wheat, barley, rice, corn, soybean meal, vegetable oil (soybean and sunflower), sugar, eggs, poultry and beef, have been estimated and examined using Autoregressive Distribution lag Model (ARDL). In order to investigate speed of adjustment or in other words the speed of movement towards equilibrium, typically the error correction model (ECM) is used. Existence of cointegration or in other words, long term relationship between a set of economic variables provide the basis for the use of error correction model. In fact, error correction model links the short term fluctuations of the variables to their long term equilibrium values and shows adjustment speed and long term movement towards equilibrium.
Results and Discussion: The results of the present study show transfer of the world price fluctuations to the domestic market in the long run is more than in the short run. Moreover, if the products face a gap in domestic demand, and the local production is so limited that it cannot limit the import of that product, the products would be more affected by fluctuations in world prices. The results of ECM model reveal that the speed of adjustment towards long run equilibrium for most products is low such that if the shock enters the market of each product a long time is required for correcting the short-run and long-run imbalance equilibrium and bring it back to the first equilibrium.
Conclusion: The results showed that most of the crops under review (e.g. corn) face with the low gap of demand and the ability of domestic production in limiting the imports is low. Therefore, a significant portion of these products are imported from abroad. Given that the country is faced with a crisis of drought and water shortage problems, the price policies cannot eliminate this problem and help stabilize the market by encouraging increased production Thus, they lead to increased demand for imports. Under such circumstances, the only way to increase production in the country is enhancement of productivity in the agricultural sector. Of course, this is only possible in the long run. For products such as rice and meat the elasticity of substitution of domestic production with imports is small. In other words, if a policy is adopted that results in an increase in the price of these products, the share of these products of the total imports does not increase that much in comparison with other products. To support these products, policies can be used such as import tariffs in the short run. Since in the ECM model for the majority of products, the adjustment speed or the speed to move to the long-run equilibrium is slow, it is necessary to consider the harmful effects and consequences of shocks in the economy. Because if a shock is entered into the model, to correct the imbalance between short-run and long-run equilibrium and come back to long-run equilibrium needs a long time.
Keywords: Armington Elasticity, Autoregressive Distribution lags Model (ARDL), Currency Elasticity, Price Transfer
