Determining Factors Affecting Price Risk of Corn in Iran

Knowledge of the origin of price fluctuations of agricultural products helps producers to achieve a reliable and stable level of income. In this study, we attempted to specify factors affecting corn price fluctuation using classical econometric models and annual data over 1992-2009 period. Results revealed that changes in import volume and world price of corn, price of broiler, and exchange rate fluctuations have significant impacts on the price risk of domestic corn. Fluctuations in exchange rates have negative while fluctuations in the other variables have positive effect on corn price volatility. The largest impact comes from the world price and smallest effect from import volume fluctuations. Accordingly, a one Rial increase (decrease) in the world price of corn relative to its long-run average, results in an increase (decrease) of 0.81 Rial in corn price in the domestic market. In addition, results indicate that the policy of guaranteed price has not been effective in reducing risk in the market price of this commodity. Thus, revise in the setting guaranteed price, and a more developed commodity exchanges mechanism is recommended.

JEL Classification: D81, G32

Keywords:
Corn, Price Risk, Econometric Models, Iran