Tracing the Effects of Agricultural Commodity Prices and Food Costs

Catherine Morrison Paul and James MacDonald

American Journal of Agricultural Economics, 2003, vol. 85, issue 3, 633-646

Abstract: We estimate a system of product and input-demand equations for food-processing industries to trace the links among farm commodity prices, food-processing costs, and food prices. Disembodied technical change, which likely reflects increasing consumer demand for convenience and product variety, has sharply reduced agricultural materials demand relative to most other food-processing inputs. This implies weakening impacts of farm price shocks on food prices. But improving quality and falling relative prices for agricultural inputs, in combination with increasing factor substitution, has counteracted these forces to encourage greater usage of agricultural inputs in food processing, and limit these trends. Copyright 2003, Oxford University Press.

Date: 2003
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