The Likely Impacts of the EU Deforestation Regulation
Paper prepared for the 2024 meeting of the Agricultural Economics Society, Edinburgh, 18-20 March 2024.
The EU Deforestation Regulation (EUDR) will introduce stringent due diligence requirements on the import of seven major tropical agricultural commodities into the EU with the objective of limiting deforestation in the producing countries. The greatest impact is likely to be in cocoa and coffee where Europe is responsible for a large share of world consumption; and in palm oil which has driven substantial deforestation. The commodity supply chains are complex. In particular, crop produced by smallholder farmers is aggregated prior to export. Tracking the deforestation status of these aggregated packets is a major and potentially costly undertaking. It is likely that this will involve some restructuring of supply chains, favouring large farms over smallholdings and international trading companies over nationally-based exporters. These developments are seen by some producing country governments as imperialistic. EUDR-compliant supplies will earn a premium and this will raise prices for European consumers. Producers who are able to comply will benefit from the premium but will bear the compliance cost. Overall there will be a net pecuniary loss. Deforestation benefits will only emerge as new planting takes place and will depend on whether other consuming countries introduce similar legislation.
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The impact of the Ukraine conflict on world grains prices
Paper presented at the Commodity and Energy Markets Association meeting, Budapest, 20-21 June 2023. An earlier version of the paper was presented at the Agricultural Economics Society Conference, University of Warwick, 27-29 March 2023.
The Russian invasion of Ukraine raised both wheat and corn (maize) prices. The paper uses event study methodology to quantify the extent of this impact in the initial months of the conflict. I compare the results from a set of standard futures market event studies with a pseudo-event study based the price implications of revisions to the USDA’s crop and export projections. This comparison indicates that disruption of Black Sea exports only resulted in small rises in grains prices, with the larger impact due to western sanctions on Russian oil exports and on the European decision to forego imports of Russian natural gas. Wheat (but not corn) futures prices rose by more than can be attributed to these two sets of factors, possibly because of fears of a wider conflict combined with momentum or trend-following behavior.
Do over-optimistic forecasts impact growth?
This paper prepared for the International Symposium on Forecasting, Oxford, 11-13 July 2022. An earlier version was presented at the "Birkbeck at 50" workshop, Birkbeck College, London, 10 June 2022.
This paper comments on an article by Beaudry and Willems (BW, American Economic Journal: Macroeconomics, January 2022) who argue that over-optimism in the IMF’s country growth forecasts may result in excessive expenditure or over-investment with adverse consequences for debt levels They suggest that any short term stimulus is offset by negative longer term consequences. I show that BW misinterpret their main results which turn out not to have any implications for growth. Other results in their paper do not distinguish between a possible causal impact of over-optimism on growth outcomes and the claim that IMF forecasts do help predict growth.
Cyclicality in the Prices of Tropical Crops
Paper presented at the 2022 conference of the Agricultural Economics Society, Leuven, 4-6 April 2022.
The episode of high food prices in the period from 2007 and the more recent post-lockdown commodity price resurgence have prompted discussion of commodity price cycles. Tropical commodities, particularly tree crop commodities, stand out as the most likely to exhibit cyclical patterns. The paper uses annual data for cocoa, coffee and sugar extending back into the middle of the nineteenth century to attempt to identify long cycles. I compare results obtained from the bandpass filter decomposition with those generated by the unobserved components model. Both procedure rely on separation of trend and cycle. This is straightforward in sugar, where the trend is well defined, but more problematic in coffee and, especially so in cocoa. Some evidence is found for a 25 year cycle in all three commodities.