Investigating the international prices of wheat and rice

Abstract

This paper investigates the international quarterly prices of wheat and rice from 1983(1) to 2012(4). The empirical analysis takes place with the structural time series methodology which decomposes the price series into their trend, cycle, seasonal and irregular components. The empirical results indicate that wheat prices present cyclical behavior while rice prices except for cyclicality are mainly governed by the irregular component. The results strain the importance of treating wheat and rice like two distinct commodities that require country specific and commodity specific policy measures. Finally, the impact of the shrinking Chinese grain stocks after 2002 is proposed as an important factor that resulted in the 2008 price spike.