The Relationship between U.S. and Canadian Wheat Prices

Abstract

This paper examines the relationship between the price for Canadian wheat and the price for U.S. wheat. While a great deal of the variation in the Canadian series can be attributed to oscillations in either the exchange rate or the U.S. price of wheat, changing technologies, shifting market power, the marketing strategies of major market participants, and domestic market conditions are also seen to play a role in the price determination process and should be considered when making longer‐term forecasts. The fact that the most encompassing price linkage specifications identified in this study differ significanty from the specification in a number of forecasting models in use today should be a point of particular concern. Since many of the decision equations (area seeded, inputs purchased, etc.) in place in these models essentially are driven off the Canada U.S. price linkage equation, the observed misspecification may have a detrimental impact on all forecasted series. Les auteurs examinent les rapports existants entre les prix canadiens et les prix américains du blé. Si une grande portion de la variabilité observée dans la série de donnée canadienne peut s'expliquer par les taux de change ou par le prix américain du blé, l'évolution des techniques, les déplacements des marchés, les stratégies de commercialisation des grands intervenants commerciaux et les conditions du marché intérieur jouent apparemment aussi un rôle dans la formation des prix. Ces facteurs devraient done être pris en compte dans les prévisions à long terme. Le fait que les spécifications de liaisons de prix les plus complètes dégagées dans cette étude s'técartent significativement de celles en usage dans plusieurs modèles de prévision mérite qu'on s'y arrête. Comme un bon nombre d'équations de décision (superficies emblavées, agrofournitures, etc.) utilisées dans ces modèles s'éloignent de l'équation de liaison de prix canado‐américaine, cet écart pourrait avoir un impact défavorable sur toutes les séries de prévisions.

Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices

“…1 (13.5%) and US Gulf No. 2 DNS (14%) 5 Gilmour and Fawcett (1987). inter alia observe that the characteristics and end use of different wheat types vary substantially, and Mohanty et al.…”

A Reexamination of Price Dynamics in the International Wheat Market

“…By contrast, a second group of studies based most of their results on empirical evidence by analyzing price relationships in the international wheat market (Spriggs et al 1982;Perkins et al 1984;Gilmour and Fawcett 1987;Goodwin and Schroeder 1991;Goodwin and Smith 1995;Mohanty et al 1995;Mohanty et al 1996). Price determination in the international wheat market has received special attention because of the small number of exporting regions as well as the presence of large multinational grain trading companies and the fact that wheat is not an entirely homogeneous product (Mohanty et al 1995).…”

“…Price determination in the international wheat market has received special attention because of the small number of exporting regions as well as the presence of large multinational grain trading companies and the fact that wheat is not an entirely homogeneous product (Mohanty et al 1995). Spriggs et al (1982), Gilmour and Fawcett (1987), and Mohanty et al (1996) have limited their analysis to U.S. and Canadian prices. Spriggs et al (1982) utilized the Granger causality test to examine the price leadership role between daily U.S. and Canadian wheat prices.…”

“…They concluded that there was no significant price leadership role between the U.S. and Canada. Similarly, Gilmour and Fawcett (1987) analyzed U.S. and Canadian wheat prices using the price reaction function and achieved results comparable to Spriggs et al (1982). However, these studies utilized internal prices rather than export prices.…”

How far do shocks move across borders? Examining volatility transmission in major agricultural futures markets

“…of di erent agricultural commodities. Most of the previous research including Spriggs, Kaylen, and Bessler (1982), Gilmour and Fawcett (1987), Goodwin and Schroeder (1991) and Mohanty, Peterson, and Kruse (2005) have either examined price volatility of agricultural commodities under a univariate approach or have focused on the interdependence and interaction of agricultural futures markets in terms of the conditional rst moments of the distribution of returns. 3 We explore futures markets interactions in terms of the conditional second moment under a multivariate approach, which provides better insight into the dynamic price relationship of international markets by incorporating volatility spillovers.…”