Drivers for the agricultural price gap in the different agrarian structures of the EU

Abstract

The index of agricultural goods output comprises weighted changes of prices of agricultural commodities whereas the index of intermediate consumption describes fluctuations of outlays’ prices such as seeds and planting stock, energy, fertilizers, soil improvers, plant protection products or feedingstuffs. The relation of these two indices is defined as “price gap” or “price scissors”. There is a lot of price models for agricultural goods investigated in the subject literature. However, the issue of modeling drivers for the price gap has been rarely explored. For that reason authors aim to estimate long-term regression models of the agricultural price gap for different European countries that represent varied agrarian structures. The analysis entails few stages. In the first stage, the long-term price indices (from 1980 to 2014) were computed basing on EUROSTAT and FAOSTAT agricultural prices data for all available agricultural products and outlays in the EU-27 countries. Then, the aggregated indices were weighted with a volume of production or intermediate consumption on the basis of the average price indices for the respective outputs or inputs. In the second stage, a cluster analysis was performed with regard to the utilization of a land factor by individual farms in the subsequent European countries. In the third stage, three countries were chosen for case studies from the each of the distinguished clusters and the econometric models of price gap were estimated where the indices of outputs and inputs are independent variables. An interesting finding was discovered that marginal effects for price gap drivers are much stronger in the countries of an intensive and large scale agriculture (as France, Great Britain and Denmark) than in the countries of fragmented agrarian structures such as Greece, Portugal and Ireland.