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How government policies affect the relationship between Polish and world wheat prices

Author

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  • Figiel, Szczepan
  • Scott, Tom
  • Varangis, Panos

Abstract

Cash prices for wheat in Poland are not closely related to futures prices in Chicago and London, for several reasons: differences in seasonality, fluctuations in exchange rate, poor dissemination of information in Poland, and most important the Polish government's intervention in wheat markets. Polish wheat prices generally move to expected intervention prices and then stay there until the next intervention level becomes known. The exception was in 1994-95, when sharply higher world prices raised prices in Poland. A wheat futures exchange in Poland could give the private sector a tool for hedging against price risk, improving efficiency and price discovery in Poland. It would be difficult to develop, however, under present interventionist policies. This situation could be improved by reducing the protection of prices and by making any intervention rules-based (reducing uncertainty about policies). Should intervention be reduced or rationalized, the next question is whether Poland needs its own wheat futures exchange or whether Poland's private sector can use futures exchanges in London and Chicago to hedge against risk. The answer to that question is not an easy one.

Suggested Citation

  • Figiel, Szczepan & Scott, Tom & Varangis, Panos, 1997. "How government policies affect the relationship between Polish and world wheat prices," Policy Research Working Paper Series 1778, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1778
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    References listed on IDEAS

    as
    1. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
    2. Kilcollin, T. Eric & Frankel, Michael E. S., 1993. "Futures and options markets: Their new role in Eastern Europe," Journal of Banking & Finance, Elsevier, vol. 17(5), pages 869-881, September.
    3. Bruce L. Gardner, 1996. "Agricultural Support in Eastern Europe: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 808-809.
    4. Clifford W. Smith & Charles W. Smithson & D. Sykes Wilford, 1989. "Managing Financial Risk," Journal of Applied Corporate Finance, Morgan Stanley, vol. 1(4), pages 27-48, January.
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    Cited by:

    1. Hossein-Yekani, Seyed-Ali & Bakhshoodeh, Mohammad, 2006. "The importance of developing future contracts: a case study of Iran Agricultural Commodity Exchanges," MPRA Paper 29593, University Library of Munich, Germany.
    2. Figiel, Szczepan, 2000. "Impact of Government Intervention on Price Integration between Polish and World Wheat Markets," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 1(2), pages 1-12, August.
    3. Figiel, Szczepan, 1998. "Dynamics Of Polish Wheat Prices In Comparison To Selected World Prices In A Period Of Economic Transformation," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20864, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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