Agricultural Development Economics


Cereal price transmission in several large Asian countries during the global food crisis
D. Dawe
Publication date
World cereal prices have been increasing substantially since 2003. Until 2008, the Asian countries examined in this paper (Bangladesh, China, India, Indonesia, the Philippines, Thailand and Viet Nam) had generally been able to contain domestic price increases by using trade policies and taking advantage of the depreciation of the US dollar. On average, domestic price increases in real terms were only about onethird of the world price increases in real US dollar terms. In the face of large world price increases in early 2008, the transmission to domestic markets was still incomplete, but prices increased substantially in some countries. In other countries, however, prices increased very little, if at all. Trade policies explain some of the different outcomes across countries, but speculative activity by farmers, traders, and consumers also appears to have played a role. While there has been incomplete transmission between world and domestic markets, transmission within national borders has been stronger in the sense that, for any given country, percentage increases in farm and consumer prices have been similar. The overall price increases during the past several years have probably been large enough to create a supply response, even in the face of higher fertilizer prices.