The effect of barge and ocean freight price volatility in international grain markets

Michael S. Haigh and Henry L. Bryant

Agricultural Economics, 2000, vol. 25, issue 1, 41-58

Abstract: This paper looks at the potential role of time‐varying volatility of Mississippi river barge and ocean freight prices on commodity prices in Illinois, at the US Gulf and in Rotterdam using a Vector Error Correction GARCH‐in‐Mean model. The model is used to infer the extent to which transportation price risk affects price dynamics in international grain markets. Results from a simulation exercise indicate that both barge and ocean price volatility influence grain prices, but barge price volatility tends to have a greater impact on grain prices and marketing margins than that arising from ocean price volatility. Consistent with most studies that evaluate the role of risk in marketing channels, results here suggest that a reduction in barge rate risk would reduce marketing margins between Illinois and the US Gulf, and between the US Gulf and Rotterdam. The existence of an ocean freight futures contract coupled with the lack of a futures contract for barge rates may be partially responsible for the finding that barge rates have a significant influence on grain prices and contribute most to wide marketing margins found throughout the international grain‐marketing system.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/j.1574-0862.2001.tb00234.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:agecon:v:25:y:2000:i:1:p:41-58

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0169-5150

Access Statistics for this article

Agricultural Economics is currently edited by W.A. Masters and G.E. Shively

More articles in Agricultural Economics from International Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().