The International environment of agriculture
Determinants of agricultural prices (1961-2023)
Abstract
Based on the evolution of relevant variables in the international economy during 1961‑2023, those that explain, in the long term, the behavior of price indices in the agricultural, grain, and oilseed markets were identified. The Johansen test was used to establish the long‑term equilibrium of the variables in the models, and vector error correction models (VECM) were used to formulate the short‑term equation. A robustness and stability analysis was performed in each case, verifying the absence of significant structural changes. The analysis of the variables’ behavior highlights the influence of protectionist and subsidy policies on agricultural prices, which show a slightly negative trend during the period analyzed. It was observed that the most important variables explaining the behavior of agricultural prices in all cases are the real interest rate and the real exchange rate of the United States, with negative elasticity with respect to agricultural prices; the world merchandise trade/gross domestic product (GDP) ratio, with positive elasticity; and the behavior of energy commodity prices, with negative elasticity. These results were corroborated using a model that considers free on board (FOB) prices for Argentine wheat for the period under review.
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