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Market Delineation and Price Leadership in the World Wheat Market: A Cointegration Analysis

Published online by Cambridge University Press:  15 September 2016

Atanu Ghoshray
Atanu Ghoshray*
Affiliation:
Economics in the Department of Economics and International Development at the University of Bath in Bath, England
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Abstract

Wheat types may be classified according to strength, a baking characteristic. Since the demand for wheat is derived demand, the baking characteristic is directly related to end use. Accordingly, the wheat classes that are used in this study are divided into sub-groups according to strength, that is, strong, medium, and weak wheats. Time-series methods are employed to determine how the different classes of wheats are related within each sub-group. The different wheats under the different sub-groups are found to be substitutes to various degrees, but form a robust cointegrating relationship, implying that the wheat prices in these markets are bound together by a long-term equilibrium relationship. Within each of the sub-groups, the U.S. wheats were found to act as a price leader, driving the prices of other wheats belonging in the same sub-group. These U. S. wheats were found to form no long-run relationship between each other given their distinct end uses. The study highlights the importance of differentiating wheat by end use to specify price linkages more accurately.

Keywords

cointegrationwheatprice leadershipmarket segmentation
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 35 , Issue 2 , October 2006 , pp. 311 - 326
Copyright
Copyright © 2006 Northeastern Agricultural and Resource Economics Association 

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