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The world market for soybeans: price transmission into Brazil and effects from the timing of crop and trade

Author

Listed:
  • Mario A. Margarido

    (IEA)

  • Frederico A. Turolla

    (ESPM)

  • Carlos R. F. Bueno

    (IEA)

Abstract

This paper investigates the price transmission in the world market for soybeans using time series econometrics models. The theoretical model developed by Mundlack and Larson (1992) is based on the Law of the One Price, which assumes price equalization across all local markets in the long run and allows for deviations in the short run. The international market was characterized by three relevant soybean prices: Rotterdam Port, Argentina and the United States. The paper estimates the elasticity of transmission of these prices into soybean prices in Brazil. There were carried causality and cointegration tests in order to identify whether there is significant long-term relationship among these variables. There was also calculated the impulse-response function and forecast error variance decomposition to analyze the transmission of variations in the international prices over Brazilian prices. An exogeneity test was also carried out so as to check whether the variables respond to short term deviations from equilibrium values. Results validated the Law of the One Price in the long run. In line with many studies, this paper showed that Brazil and Argentina can be seen as price takers as long as the speed of their adjustment to shocks is faster than in the United States, the latter being a price maker.

Suggested Citation

  • Mario A. Margarido & Frederico A. Turolla & Carlos R. F. Bueno, 2007. "The world market for soybeans: price transmission into Brazil and effects from the timing of crop and trade," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 17(2), pages 241-270, May-Augus.
    • Handle: RePEc:nov:artigo:v:17:y:2007:i:2:p:241-270
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    Citations

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    Cited by:

    1. de Lima, Daruichi Pereira & Fioriolli, José Carlos & Padula, Antonio Domingos & Pumi, Guilherme, 2018. "The impact of Chinese imports of soybean on port infrastructure in Brazil: A study based on the concept of the “Bullwhip Effect”," Journal of Commodity Markets, Elsevier, vol. 9(C), pages 55-76.
    2. Acosta, Alejandro, 2012. "Measuring spatial transmission of white maize prices between South Africa and Mozambique: An asymmetric error correction model approach," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 7(1), pages 1-13, October.
    3. Jitka Sirohi & Zuzana Hloušková & Klára Bartoňová & Karel Malec & Mansoor Maitah & Robert Koželský, 2023. "The Vertical Price Transmission in Pork Meat Production in the Czech Republic," Agriculture, MDPI, vol. 13(6), pages 1-14, June.
    4. Byung Min Soon & Jarrett Whistance, 2019. "Seasonal Soybean Price Transmission between the U.S. and Brazil Using the Seasonal Regime-Dependent Vector Error Correction Model," Sustainability, MDPI, vol. 11(19), pages 1-9, September.
    5. Lin, Dayan & Wu, Guosong & Zhu, Jing & Yang, Fan & Aniah, Dominic, 2015. "A Study on the Impact of Constraints from Exporters' Exporting Prowess on Source Distribution of China's Soybean Imports," 2015 Conference, August 9-14, 2015, Milan, Italy 211562, International Association of Agricultural Economists.
    6. Tadesse Kuma Worako, 2016. "Transactions Costs and Spatial Integration of Vegetable and Fruit Market in Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 24(1), April.
    7. Gustavo Barboza Martignone & Karl Behrendt & Dimitrios Paparas, 2022. "Price Transmission Analysis of the International Soybean Market in a Trade War Context," Economies, MDPI, vol. 10(8), pages 1-22, August.

    More about this item

    Keywords

    soy; elasticity of price transmission; time series econometrics;
    All these keywords.

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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