How low is the price elasticity in the global cocoa market

IF 0.4 Q4 AGRICULTURAL ECONOMICS & POLICY

African Journal of Agricultural and Resource Economics-AFJARE Pub Date : 2017-07-05 DOI:10.22004/AG.ECON.258587

András Tóthmihály

{"title":"How low is the price elasticity in the global cocoa market","authors":"András Tóthmihály","doi":"10.22004/AG.ECON.258587","DOIUrl":null,"url":null,"abstract":"The high volatility of the world cocoa price makes the millions of cocoa farmers in the developing world highly vulnerable to poverty. A large volatility in the value of an agricultural commodity is linked to the inelasticity of its supply or demand. Therefore, we test the hypothesis that the price elasticities of the global cocoa supply and demand are low. We describe the global cocoa market with cointegration dynamic supply, demand and price submodels. Our OLS, 2SLS, and SUR estimates are based on annual global observations covering the years 1963 through 2013. We find that the global cocoa supply is extremely price-inelastic: the corresponding short- and long-run estimates are 0.07 and 0.57. The price elasticity of cocoa demand also falls into the extremely inelastic range: the short- and long-run estimates are −0.06 and −0.34. Based on these empirical results, we consider the prospects for cocoa price stabilization. The cocoa price volatility was treated with various unsuccessful methods in the past. A possible solution for reducing the price volatility would be the encouragement of crop diversification. This increases the price elasticity of cocoa supply by adjusting the effort and money allocation between the crops, thus decreasing price volatility.","PeriodicalId":45228,"journal":{"name":"African Journal of Agricultural and Resource Economics-AFJARE","volume":null,"pages":null},"PeriodicalIF":0.4000,"publicationDate":"2017-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"14","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"African Journal of Agricultural and Resource Economics-AFJARE","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.22004/AG.ECON.258587","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"AGRICULTURAL ECONOMICS & POLICY","Score":null,"Total":0}

引用次数: 14

Abstract

The high volatility of the world cocoa price makes the millions of cocoa farmers in the developing world highly vulnerable to poverty. A large volatility in the value of an agricultural commodity is linked to the inelasticity of its supply or demand. Therefore, we test the hypothesis that the price elasticities of the global cocoa supply and demand are low. We describe the global cocoa market with cointegration dynamic supply, demand and price submodels. Our OLS, 2SLS, and SUR estimates are based on annual global observations covering the years 1963 through 2013. We find that the global cocoa supply is extremely price-inelastic: the corresponding short- and long-run estimates are 0.07 and 0.57. The price elasticity of cocoa demand also falls into the extremely inelastic range: the short- and long-run estimates are −0.06 and −0.34. Based on these empirical results, we consider the prospects for cocoa price stabilization. The cocoa price volatility was treated with various unsuccessful methods in the past. A possible solution for reducing the price volatility would be the encouragement of crop diversification. This increases the price elasticity of cocoa supply by adjusting the effort and money allocation between the crops, thus decreasing price volatility.

查看原文本刊更多论文

全球可可市场的价格弹性有多低

世界可可价格的高度波动使发展中世界数百万可可种植者极易陷入贫困。农产品价值的巨大波动与其供应或需求的不弹性有关。因此，我们检验了全球可可供需的价格弹性较低的假设。我们用协整动态供应、需求和价格子模型来描述全球可可市场。我们的OLS、2SLS和SUR估计基于1963年至2013年的年度全球观测。我们发现，全球可可供应极不具有价格弹性：相应的短期和长期估计值分别为0.07和0.57。可可需求的价格弹性也属于极不弹性的范围：短期和长期估计值分别为-0.06和-0.34。基于这些实证结果，我们考虑了可可价格稳定的前景。过去曾用各种不成功的方法来处理可可价格的波动。减少价格波动的一个可能的解决办法是鼓励作物多样化。这通过调整作物之间的努力和资金分配来增加可可供应的价格弹性，从而减少价格波动。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

African Journal of Agricultural and Resource Economics-AFJARE AGRICULTURAL ECONOMICS & POLICY-

CiteScore

1.20

自引率

16.70%

发文量

期刊介绍： The African Journal of Agricultural and Resource Economics (AfJARE)/Journal Africain d’Economie Agricole et des Ressources (JAEAR) is a publication of the African Association of Agricultural Economists (AAAE). The journal publishes original research about how African agriculture interacts with local and global economic systems and policy regimes in its impacts upon people. The scope of the journal covers the roles of markets, technology, policy, institutions and the natural environment in shaping the lives of well being of Africans engaged in agricultural activities. The journal strives to nurture and enhance the capacity of African professionals to conduct and publish scientific research and provides a venue for communicating and disseminating their findings. Multi-disciplinary, problem-oriented articles are encouraged. Submissions may deal with teaching, research extension, consulting, advising, entrepreneurship and administration. The Chief Editors and Editorial Board, under the general direction of the AAAE President, Executive Committee and Council are charged with implementing Journal policy to serve members of AAAE. The main section of the journal publishes technical research articles while a small section is devoted to publishing brief notes with important policy content and book reviews. The journal is a quarterly publication.