Inputs Price Shock of Corn Production and its Impact on Corn Prices: Panel Vector Auto Regression Approach

IntroductionOne of the characteristics of agricultural products in Iran is continuous price fluctuations. There are many factors that can lead to fluctuations in prices in the agricultural sector. The important of these factors are the seasonal and cyclical changes in supply, the shift from global prices to the domestic market of agricultural products, the shifting of the volatility of inputs into products and the fluctuations caused by the general trend of prices The aim of this study is to evaluate the impact of price shock inputs that are used in the production of corn, on the price of the corn crop. Studies in Iran are further on the transfer of the farm to the retail price and the transmission of price shocks from the inputs market to product market has not been established. To examine this matter, VAR model with panel data was used.
Materials and MethodsFor this purpose, we used data on the prices of inputs used in corn production, including land, fertilizer, labor, seed, and pesticides, as well as the price of corn since 1999 to 2012 year, for 16 provinces in Iran. That these provinces produce 93.5 percent of total corn Produced in the country. In order to analyze the data model is specified in the form of PVAR (Vector Auto Regression with Panel Data). Time-series vector auto regression (VAR) models originated in the macro econometric literature as an alternative to multivariate simultaneous equation models. All variables in a VAR system are typically treated as endogenous, although identifying restrictions based on theoretical models or on statistical procedures may be imposed to disentangle the impact of exogenous shocks on the system. To specify the model input price shock impacts the price of corn. The model introduced by Kilian was used as the basis model. According to the study, the effect of input price shocks on the price of corn models was modified.
Results and DiscussionIf the shock rise in the price of pesticide, fertilizer, and land to occur each of these shocks separately will increase the price of corn, the effect of these shocks has been moved to later periods. Fertilizers price shocks are long-term and neutralization of this process is very slow. However the impact of price shocks of agricultural pesticides and the land quickly neutralized and this index converges whit corn price. Shock rise in corn prices over a period, Makes the corn prices generally decline in the next period and increase the area under cultivation in the following year, with increasing the area under cultivation may take advantage of economies of scale provided and on the other hand, there is the possibility of commuting buying with more inputs. The effect of all impulses can be said after ten periods, will be neutralized. Only shock that after ten periods are not neutral and it is still its effects visible as the shock of the price of fertilizer. The results showed that the corn price volatility is partly influenced by the price of production inputs.63% of the corn price growth changes related to changing values of its past, 8/4% due to changes in land rental growth, 24% of the change in the growth of the price of fertilizer; 1.5% growth related to changes in the price of seed growth (according to the results of the effect is reversed), and 4.1% related to changes in the growth of prices of agricultural pesticides.
ConclusionsTime of purchase of chemical fertilizers is during planting (phosphate fertilizers) and retention period product (Nitrogen fertilizers).In this sense, it seems that the price of fertilizer and how to increase or decrease is one of the important variables and decision-making (after the price trend of maize) in the formation of corn prices on the market. The ownership structure of the agricultural sector is in such a way that most farmers have their land ownership. The cost of renting land is in the form of implicit costs and not obvious and its role in decision-making between variables is low. The cost of agricultural pesticides in the entire cost of production is not significant and the results show that its role in the formation of corn price changes is small. Organization of market demand and supply and timely distribution of inputs for control market price fluctuations and shocks on inputs market can be effective in stabilizing the price of corn.