TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

International Soft Wheat Markets Under Policy Intervention
demand is much less concentrated than the export supply (USDA 2005, p.10; see
figure 4.4).
The EU is a major player, being amongst both the largest exporters and the
largest importers; but to whom the “price leadership” on world wheat markets
belongs is an open question, to which empirical works have given different
answers. Amongst the five world major players (Argentina, Australia, Canada, the
EU and the US), Mohanty et al. (1999) show that there is no distinct leader 39 .
However, in this work, the US price will be assumed to be representative of the
world one. This seems a reasonable assumption; since 1975-76, the US share of
global exports has fluctuated between 25 and 45 percent of the world total (USDA
2005, p.8; figure 4.2).
50.000
40.000
30.000
20.000
10.000
0
1961
1963
1965
1967
Figure 4.1 World wheat exports (1000 tonnes)
1969
1971
1973
1975
1977
1979
1981
Source: Faostat 2007
39 They find out that, while the US price is affected by the Canadian and the Australian prices only, the EU
responds to US and Canadian changes but doesn’t have any influence on their prices. The EU responds to the
US, but the reverse is not true. Previous studies (see Mohanty et al. 1999), some of which could be
misspecified for not taking into account cointegration) get different results: some show that there is no
significant leadership role between the US and Canada, while others find a strong leadership role for Canada
for durum and Hard Red Spring markets. Goodwin and Schroeder (1991) find that both the US and Canada
have a significant effect on the price of competing exporters but also that, while the US has an effect on
Canada, the reverse is not true; they consider the US as a price leader in the international wheat market.
Dawson and Sanjuan (2007) find that Canada is the price leader in the relation with the US price for hard
wheats. In Ghoshray and Lyoid (2003) Canada is found to be the price leader in the North American market
for hard wheat exports.
1983
1985
Russian Federation Ukraine Argentina
Australia Canada US
EU
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
55