Price Transmission for Agricultural Products in Brazil

This paper analyzes the farm, wholesale, and retail price series of nine agricultural prcxiucts (rice, beans, maize, soyabeans, potatoes, onions, bananas, tomatoes, and oranges). Causality analysis is carried out to determine the possible existence of a market level that systematically tends to lead price changes. Immediate and total elasticities of price transmission are estimated to provide evidence regarding the relative siz.e of price variations at different market levels. All results relate to the city of Sao Paulo, as a consumption centre, and the relevant supplying wholesale firms and production regions. For most of the products analyzed (those traded predominantly in the domestic market), wholesale was detected to be the market level at which price changes were initiated. For products traded internationally-like soyabeans and oranges-the fann level was apparently the point from which price changes are transmiued to the domestic market. Price transmission may also originate at the retail level for products with high income elasticity of demand or with a conswnption pattern affected by weather conditions, like oranges and tomatoes. In general, a price change initiated at the wholesale level is reasonably reduced when it reaches the retail level. Ahnost all other price changes tend to be transmitted approximately proportionally between market levels. Price transmission is distributed over time, but most of the variation tends to be transmitted within three months of the initial shock.