Sayed H. Saghaian

The Impact of the Oil Sector on Commodity Prices: Correlation or Causation?

The interconnections of agriculture and energy markets have increased through the rise in the new biofuel agribusinesses and the oil–ethanol–corn linkages. The question is whether these linkages have a causal structure by which oil prices affect commodity prices and through these links, instability is transferred from energy markets to already volatile agricultural markets. In this article, we present empirical results using contemporary time-series analysis and Granger causality supplemented by a directed graph theory modeling approach to identify the links and plausible contemporaneous causal structures among energy and commodity variables. The results show that although there is a strong correlation among oil and commodity prices, the evidence for a causal link from oil to commodity prices is mixed.

Monetary Impacts and Overshooting of Agricultural Prices in an Open Economy

This articles focus is on the time adjustment paths of the exchange rate and prices in response to unanticipated monetary shocks. First, we expand the theoretical specification of the overshooting hypothesis by generalizing Dornbuschs model to include a third sector (i.e., agricultural prices). Second, we employ Johansens cointegration test along with a vector error correction model to investigate whether agricultural prices overshoot in an open economy. The empirical results indicate that agricultural prices adjust faster than industrial prices to innovations in the money supply, affecting relative prices in the short run, but strict long-run money neutrality does not hold. Copyright 2002, Oxford University Press.

Overshooting of Agricultural Prices in Four Asian Economies

This article examines the impacts of monetary policy on agricultural prices in four Asian economies using time series analysis and graph theory. The estimations clearly show that agricultural prices overshoot their long-run equilibrium values for Korea, Philippines, and Thailand, and the overshooting for agricultural prices is larger than for manufactured prices. Impulse-response functions and variance-decomposition analysis based on directed graphs and causal structures highlight the complex interplay among the variables in the model and how those relationships differ by country. Money supply changes clearly affect real variables and relative prices for all countries either through overshooting or non-neutrality of money.

Measuring the Intensity of Competition in the Japanese Beef Market

A residual demand model for beef exports to Japan is specified and estimated. The objective is to estimate the extent of market power. It is assumed that each exporting country faces a downward-sloping residual demand curve, which reflects the market demand minus the supplies of competitors, and that exporters maximize profit through their output decisions. The analysis is disaggregated by beef cut and form to capture the variation by beef market segments. The results indicate that the highest markup of price over marginal cost belongs to U.S. frozen ribs, the only indication of market power by U.S. exporters. Canada is found to have limited market power, whereas Australia and New Zealand enjoy some market power, including five chilled beef categories.

Dynamics of Price Transmission in the Presence of a Major Food Safety Shock: Impact of H5N1 Avian Influenza on the Turkish Poultry Sector

This article addresses the dynamic impact of the 2005 H5N1 avian influenza outbreak on the Turkish poultry sector. Contemporary time-series analyses with historical decomposition graphs are used to address differences in monthly price adjustments between market levels along the Turkish poultry supply channel. The empirical results show that price adjustments are asymmetric with respect to both speed and magnitude along the marketing channel. Results also reveal a differential impact of the exogenous shock on producers and retailers. The findings have critical efficiency and equity implications for the supply-chain participants.

TRADE AND FOREIGN DIRECT INVESTMENT MANAGEMENT STRATEGIES FOR U.S. PROCESSED FOOD FIRMS IN CHINA

This research examines the relationship between U.S. foreign direct investment (FDI) and exports of processed foods to China and identifies management strategies to enhance U.S. competitiveness. Two-stage least-squares empirical econometric results from a simultaneous equation system indicate that there exists a strong complementary relationship between U.S exports and FDI into China. Therefore, the appropriate managerial strategy to access Chinese processed foods markets is to increase overall business activity, both FDI and exports into China.

Export Demand Estimation for U.S. Corn and Soybeans to Major Destinations

The United States is the leading producer and exporter of corn and soybeans in the world. The United States exports 20% of the world’s corn and 30% of the world’s soybeans every year. In this study, we empirically estimate the export demand of U.S. corn and soybeans to three main destinations, China, Japan, and EU, in the current context of energy and agriculture linkages and production of ethanol from corn. A log-linear equation is used to estimate the export demand estimation of U.S. corn and soybeans. Data for the U.S. and its three main importer markets were gathered for the 1980-2011 period. The results of the logarithmic model estimates showed that china had the most elastic demand. China has the highest income elasticity of 2.5, while the income elasticity for Japan and EU were close to 1. The parameter estimates for price of soybean as a cross price was significant for China and EU, and parameter estimates for price of corn as a cross price was significant only for Japan. The positive sign revealed soybeans and corn to be substitutes in those countries.

Organic Labeling, Private Label, and U.S. Household Demand for Fluid Milk

The U.S. fluid milk market has been experiencing two trends in the recent decade: the fast growth of private label milk and organic milk. Using the data from Nielsen Homescan Panel, we estimate a censored demand system to study the demand relations among types of milk differentiated by brand types and organic status. We find that sociodemographic factors still play important roles in household choice of milk types, and fluid milk, as a whole, is an inferior good. Moreover, as income increases, households are more likely to shift from buying conventional milk to organic milk and from private label conventional milk to branded conventional milk, as indicated by the asymmetric cross price elasticities. Corresponding implications for milk producers and marketers are discussed.

Dynamics of Price Adjustment in Qualitatively Differentiated Markets in the U.S.: The Case of Organic and Conventional Apples

Production and consumption of conventional and organic apples in the U.S. have changed dramatically over the past two decades. Despite a drop in the conventional apple production, production of organic apples shows a double-digit growth. Demand for organic apples also continues to outpace growth in overall organic fruit sales. In this research, we investigate whether these changes have an impact on price adjustment dynamics between these two qualitatively differentiated products. We use a Markov-Switching Assymetric Vector Error Ccorrection model (MS-AVECM) and weekly U.S. national retail prices for the 2010-2015 period for three varieties of apples: Gala, Fuji, and Red Delicious. The MS-AVECM results indicate three Markov-Switching regimes can be defined for the three varieties during the study period. The results show there are different short-run price adjustment daynamics in each of these regimes and asymmetric price transmission behavior between organic and conventional apples. Result indicates that apple varity plays important role in the price relationship between organic and conventional apple. These findings have implications for farmers, wholesalers, retailers, policy makers, as well as consumers.