Open Trade, Price Supports, and Regional Price Behavior in Mexican Maize Markets

Abstract

We analyze wholesale maize prices in 12 Mexican markets from 1998 to 2010, a period when markets became more open to inter- and intranational trade. We ask how the influence of global and local forces on Mexican maize prices changed during this period. We also explore how the strength of global and local forces varies across maize-producing regions. In general, we expect the influence of global forces to increase and local forces to decrease as markets become more open. We find that the influence of global forces does vary over the study period and, counter to expectation, is the highest at the beginning and middle of the period rather than at the end. This result suggests that even under less open market conditions, buyers and sellers were still following global price signals. In contrast, the influence of local forces follows expectation and decreases over time. However, the estimated pattern of response is not uniform across various maize-producing regions. Taken together, our results suggest that opening agricultural markets can result in regionally distinct outcomes and counterintuitive price behavior.