The impact of grain price regulation policies on U.S.-China price linkages

Abstract

This study explores changes in the transmission patterns between domestic and global grain prices under different grain price regulation policies. Price transmission is influenced by both policy interventions and external market dynamics. We conducted a segmented regression analysis to examine these relationships. The analysis focuses on how changes in international grain prices are transmitted to domestic prices before and after key policy adjustments. We interpret the results as shifts in price transmission coefficients across different policy regimes rather than as definitive causal impacts of specific policies. The study focuses on four major grains: wheat, rice, corn, and soybeans. We evaluated policy tools such as minimum purchase prices, temporary storage programs, target pricing mechanisms, and producer subsidies. Our findings show that the correlation between international and domestic grain prices became more strongly positive after specific policy changes. These changes include the introduction of the wheat minimum purchase price in 2006, the implementation of temporary storage for corn and soybeans in 2008, and the shift to producer subsidies for corn in 2016. These results indicate a shift towards more interconnected and resilient price transmission within the grain market system. In contrast, before the reduction in the rice minimum purchase price in 2018, international rice prices exhibited a slightly negative association with domestic prices. This negative association became more pronounced after the policy change. A similar shift occurred for soybeans, where the transmission pattern of global prices shifted from positive to negative following the adjustment of soybean price regulations in March 2017. These findings provide guidance for optimizing national grain pricing policies and strengthening the overall resilience and adaptability of food security systems, with an emphasis on their complex, interrelated nature.