Price transmission in (de)regulated agricultural markets

Abstract

ABSTRACT This paper emphasises the impact of the ongoing liberalisation of agricultural policies and trade in agricultural commodities on spatial price transmission in agricultural markets. Based on a literature review covering a broad range of topics, the article derives four main conclusions. First, more market-oriented agricultural policies and trade liberalization improve horizontal price transmission in global agricultural markets. Second, in the integrated agricultural markets, some regions tend to lead the price discovery process, which is determined mainly by their role in international trade. Third, with the growing integration of agricultural markets, the significance of local factors such as seasonality is diminishing. Fourth, as markets become more integrated, spontaneous public interventions aimed at the stabilisation of domestic prices are less effective. These findings may help market participants at all stages of the food supply chain to better understand how policy deregulation and trade liberalisation affect price setting in agricultural markets and, consequently, enable them to adjust to these changes more effectively. Furthermore, the paper provides policy implications, as it distinguishes the institutional factors determining the degree of price transmission in agricultural markets and emphasises the decreasing effectiveness of domestic agricultural and trade policies as globalisation in agricultural markets continues.