Structural analysis of the wheat market in Brazil

Abstract

This paper analyzed the elasticity of price transmission in the wheat grain market in Brazil. The paper is divided into two parts. In the first, the elasticity of horizontal price transmission was analyzed. More specifically, the international price effects of the wheat grain and the exchange effect on the price of the grain of wheat practiced by the mills were analyzed. In the second phase, it was estimated the elasticity of vertical price transmission for wheat flour, that is, the margin of commercialization between wholesale and retail. The period analyzed was from April 2003 to March 2018. The methods used were: ADF unit root test, Johansen cointegration test, Error Correction Model (VEC), imposition of restrictions on long and short term parameters, Decomposition of Variance of Forecast Errors and Impulse Response Function. The results show that the Single Price Law prevails in the model of horizontal price transmission in the long term, while the results of the model of vertical price transmission show that the elasticity is higher than the unit of the wholesale to the retail.