Elasticity of spatial price transmission of the corn price market in Brazil: a study for Mato Grosso

Abstract

The present study aims at analyzing corn, which, due to its leadership in the grain market in terms of global production and its versatile use, has increased its importance in terms of food security and as a source of renewable energy. In Brazil, the state of Mato Grosso, which, besides its productive representativeness, has expanded its integration with the external market of grains, stands out. In this context, the goal of this study is to analyze the price transmission process between the corn producing areas in Mato Grosso and the foreign market for the period January 2009 - April 2015. For this purpose, the theoretical framework of the Law of One Price (LOP) was used and the methodology of the Granger causality test and the vector error correction model (VECM) estimation was applied. The obtained results point towards the existence of a one-way causal relationship in the Granger sense from Paranaguá towards the corn markets of Mato Grosso. Regarding the cointegration tests, only the regions of Canarana, Lucas do Rio Verde and Sapezal were found to have a long-term relationship with Paranaguá. On the other hand, the comparison between the production areas in Mato Grosso shows that there is a cointegration relationship between them, indicating an integrated corn market.

Keywords

• Transmission
• corn
• prices
• cointegration
• trade