| Vertical markets for foods are linked through pricing systems with much of the performance seen through how well price information is reflected at points of exchange, farm, wholesale, and retail markets. Knowing about price linkages contributes to assessing market performance and the potential effects of agricultural policies on the markets. Even though many studies have proved some degree of price linkages resulting from economic theory and the nature of products focused on individual commodities, there is less empirical information about commodity price linkages in general.;Price linkage models allowing for time delays are estimated using recursive methods for measuring price linkages in the U.S. food distribution system for 100 food commodities from 1970:1 to 2009:6 and generalized by using standardized coefficients regressed against five product characteristics: commodity groups, market pairs (i.e., farm and wholesale, farm and retail, and wholesale and retail), availability of stock managements, consistency of identity, and changes of market concentrations. Based on the Granger-Causal test between market prices, the linkage models are estimated separately depending on price causal directions from low- to high-level markets and from high- to low-level markets.;The estimated results are expected to verify premises; the price changes through the system, but 1) the transmission may take time, 2) may be weak or strong over time, and 3) the responses may differ with rising versus falling prices. The results show evidence of strong price linkages: price information transmits of over 40% from high to low level markets, but the linkages are declining over time by 20% in rising prices and by 31% in falling prices. Short-run responses have changed, but are generally stable in terms of short-run responses relative to long-run responses, with about half of the total responses realized in the immediate month. Short-run falling prices are reflected relatively quickly, but the total effect of long-run rising prices is greater than falling prices in grain and oil crops from low- to high-level markets. In the long run, there tends to be a level of asymmetry with rising prices being passed through quicker than falling prices. |
