Effects of Oil Prices and Exchange Rates on Imported Inputs’ Prices for the Livestock and Poultry Industry in Iran

Abstract

Iran’s agricultural sector has bilateral relations with world markets because it is an exporter of major products and it is an importer of inputs for its poultry and livestock industry. It is clear that due to the large volume of such exchanges the sector is influenced by global prices and global developments. After the ‘2000s Energy Crisis’ or the ‘Third Oil Crisis’ started in 2003, the intensity and type of relationships between oil prices and exchange rates in many countries changed and affected world prices, especially in the agricultural sector. Iran’s poultry and livestock industry has also been impacted as this sector is an importer of most of its inputs. Therefore, this study examines the correlation between oil prices and exchange rates with input prices for the livestock and poultry industry for two periods 1995–2004 (pre-crisis) and 2005–2014 (post-crisis), using the Vine copula ARIMA-MGARCH approach. The results show that due to a change in the intensity and type of correlation between oil prices, exchange rate, and inputs in the second period as compared to the first period, inputs had a positive and high correlation with oil prices and a negative correlation with the exchange rate. Therefore, imported inputs in the poultry and livestock industry were impacted by global developments, the starting of the shocks in oil prices due to the 2005 Iraq–US war, the ongoing global financial crisis, and the increase in global prices for agricultural inputs.