This Is AuburnElectronic Theses and Dissertations

Three Essays on Agricultural Prices, Markets, and Trade




Gong, Li

Type of Degree



Agricultural Economics and Rural Sociology


This dissertation includes three essays to address price analysis, market response as well as trade effects of the agricultural commodities, in both China and U.S. The first chapter examines the demand impacts following a food contamination with focus on the case of Sanlu melamine contamination of dairy products in 2008, China. Evidence is presented on media coverage effects, seasonal factors, time trends, and contemporaneous own- and cross-price effects with respect to dairy food consumptions. The average demand response of powdered milk to media reports was small, especially in comparison to price effects, and to previous estimates of related issues. This average small impact on dairy demand can be attributed to the average amount of adverse news information concerning dairy safety being small as well as short lasting, and furthermore, the media coverage had no significant lagged effect on demand. The second chapter analyzes the farm-retail price transmission for U.S. whole milk according to the conventional Houck approach and to the von Cramon Taubadel and Loy error correction model (ECM) approach by using monthly data over the period from January 1996 to December 2011. Also, to accommodate to Gardner’s (1975) model including demand and supply shifters, the study is examining for marketing margin model and price transmission model. Though the tests agrees to the previous examples that increases in the farm price of milk are passed through to the retail level more fully than were decreases in the farm price of milk, there is no clear-cut conclusions that can be drawn regarding the effects of market power on the degree of price transmission for U.S. whole milk. The third chapter focuses on the U.S. agricultural trade against the remaining of the world. The dynamic ARDL model of error correction version is applied, not only investigating if there is J-curve effect in the short-run or not, but also taking a deep analysis for U.S. recession effects and exchange rate as well as income growth effects in the long run on the U.S. trade balance of agricultural commodities which mainly consists of bulk products and high-value products. Our results indicate that there is no significant J-curve effect for three cases, while the long-run effect demonstrates that the domestic currency devaluation is positively related with U.S. agricultural trade balance for bulk, high-value and combined agricultural products, though the high-value products appear the more modest effects compared to the other two. In sum, the real trade-weighted exchange rate is found to be the key determinant of U.S. agricultural trade balance in the long-term, rather than domestic or foreign income. We find that the three categories of agricultural products do indeed respond differently to exchange rate and income. For bulk and high-value products, U.S. exports are highly sensitive to exchange rate and foreign income, while U.S. imports barely respond. For combined agricultural products, on the other hand, U.S. exports respond greatly to exchange rate, and U.S. imports behave significantly with respect to both of changes in exchange rate and foreign income; besides, the 1980s recession had significant effects on U.S. trade balance while the most recent recession had great impact on U.S. imports, showing the U.S. trade with ROW partners was mainly influenced by the two times economic crisis during our sample period.