THE IMPACT OF PETROLEUM PRICES ON VEGETABLE OILS PRICES: EVIDENCE FROM COINTEGRATION TESTS

This paper investigate the long-term relationship between the petroleum and vegetable oils prices represented by palm, soybean, sunflower and rapeseed oils prices. To that end, the bivariate cointegration approach using Engle-Granger two-stage estimation procedure is applied. The study utilises monthly data over the period of January 1983 through March 2008. The results provide a strong evidence of long-run equilibrium relation between the two products prices. The estimates of the error correction models reveal a unidirectional long-run causality flowing from petroleum to each of the vegetable oils prices under study.Vegetable oils prices, petroleum prices, cointegration, causality tests, Agribusiness, Demand and Price Analysis, Marketing, Q11 Agricultural Prices,

The impact of petroleum prices on vegetable oils prices: evidence from co-integration tests

The prices of petroleum and vegetable oils appear to be moving in tandem, a trend which was not observed before. This study seeks to investigate the long-term relationship between the prices of crude oil and selected vegetable oils. To that end, the bivariate co-integration approach using the Engle-Granger two-stage estimation procedure was applied. The study utilized monthly data over the period of January 1983 through March 2008. The results provide strong evidence of a long-run relationship between the two product prices

An econometric analysis of the link between biodiesel demand and Malaysian palm oil market

The objective of this study is to describe the important factors affecting Malaysian palm oil industry especially biodiesel demand. To that end a market model representing palm oil production, import, world excess demand, domestic consumption, export demand, rest of the world excess supply and palm oil prices is formulated.A system of equations of eight structural equations and four identities is estimated by two stage least squares method using annual data for the period 1976-2008.The domestic price equation is formed to investigate the link between biodiesel demand and the Malaysian palm oil market. The domestic price is significantly affected by Malaysian ending stock, world palm oil price, biodiesel demand and lagged domestic price. The elasticity of Malaysian palm oil domestic price with respect to biodiesel demand is then obtained. Results suggest that biodiesel demand has a positive impact on the Malaysian palm oil domestic price. Thus, significant growth in biodiesel demand is important in explaining Malaysian palm oil price determination

Supply and Demand Model for the Malaysian Cocoa Market

This paper investigates a system of supply, demand, and price equations for Malaysian cocoa using annual data over the period 1975-2008. Theoretically, in supply and demand models, the price variable is treated as endogenous. However, Hausman specification test result indicates that there is no simultaneity problem in the model. Thus, we estimate the system of equations utilizing the Seemingly Unrelated Regression (SUR) estimation technique which might be considered a more efficient estimator for supply and demand model of the Malaysian cocoa. The results suggest that the Malaysian cocoa production is mainly affected by the previous year production, price of cocoa beans at lag two as well as the harvested area. In the export demand equation, the real effective exchange rates is statistically significant determinant while the index of industrial production of advanced economies and the world price of cocoa are found to be insignificant. The results also suggest that both Malaysian industrial production index and domestic price of cocoa beans are key determinants of domestic demand for cocoa beans in Malaysia. Finally, the domestic price of cocoa beans is highly sensitive to its domestic consumption, lagged domestic price, and its world price.Supply and Demand; Malaysian Cocoa; SUR technique

Malaysian Cocoa Market Modeling: A Combination of Econometric and System Dynamics Approach

The Malaysian cocoa sector has undergone dramatic changes during the last few decades. In the early years of 1970s, this sector has maintained an upward trend in the area and consequently the production. However, the trend reversed in the late 1980s due to factors such as declining world prices, higher labour costs, widespread of cocoa pod diseases and the pull of more lucrative crops (in particular palm oil). By 2008 only about 19,976 hectares were planted with cocoa compared to a peak of 414,236 ha in 1989. Production of cocoa beans has trended down accordingly. The study combines the econometric and system dynamics approach in modeling the Malaysian cocoa market. A first order system was developed to capture the interdependencies of the major structural elements of the markets such as production, local and export demands, inventory and imports. Nevertheless, the model provides an understanding of the interrelationships between the system components and allows the simulation of policy variables changes. Future work will involve a detail examination of the interaction cocoa supply chain system (from farm to export) to provide a much more comprehensive representations of the dynamics of the market.Econometric methods; system dynamics; Malaysian cocoa market

Impact of crude oil prices on the Malaysian palm oil market

The prices of crude oil and vegetable oil appear to be moving in tandem, a trend which was not observed before.This study seeks to examine the impact of world crude prices on the Malaysian palm oil market.To that end, structural econometric model consisting of eight structural equations and four identities was proposed in this study.The model has been estimated by two-stage least squares method using annual data for the period 1976 – 2011.The counterfactual analysis of a sustained 10 per cent increase in crude oil prices predicted a direct effect of a 0.10 per cent increase in palm oil world price.The indirect effects through the palm oil world price transmission channels were: 5.62 per cent decrease in export of palm oil, 4.03 per cent decrease in palm oil import, 0.07 per cent decrease in Malaysian palm oil price, 0.01 per cent increase in domestic consumption and 0.05 per cent decrease in palm oil supply.The increase in petroleum price does bring positive economic impact on selected sub-sectors of the palm oil industry such as it encourages domestic demand and boost the bio diesel industry

The impact of the changes of the world crude oil prices on the natural rubber industry in Malaysia

This paper investigates the impact of world crude oil price on the supply, demand, stock, synthetic rubber and natural rubber (NR) prices (represented by SMR20) of the Malaysian NR industry using econometric system of equations. The study utilises monthly data from January 1990 – December 2010. A preliminary data analysis focused on univariate properties of the data series for unit root. The Granger causality test is conducted to examine the direction and relationship between the variables. The time series model is estimated using Vector Error Correction Method (VECM) with co-integration method for residual error correction of the system of equations. The results indicate that crude oil price and the supply, demand, stock, synthetic and natural rubber (SMR20) prices are significantly co-integrated, which means that the long-term equilibrium between the variables are met

Assessing the impact of increasing planted area on the Malaysian cocoa industry

The aim of this study is to describe the important variables shaping Malaysian cocoa industry via formulating a market model that represent cocoa production, import demand, domestic consumption, export demand and prices along with a stock equation as a closing identity. The model is estimated utilizing two-stage least squares annual using data extending over the period 1978-2012. The results suggest the important factors affecting cocoa production are real cocoa beans prices, planted area and bank lending interest rate. The key determinants of domestic consumption are cocoa bean prices, the Malaysian economic activity and lagged domestic consumption in addition of the expansion in cocoa products’ manufacturing industry. The export demand has been found to be elastic to all the variables including cocoa world price, real effective exchange rate, world income the previous year export demand and a negative trend since 1989, reflecting a shift of export pattern from cocoa bean to downstream products . The cocoa stock, cocoa world price and lagged domestic price are the main important factors influencing the domestic price of cocoa. Furthermore, a counterfactual analysis suggests that increasing the planted area will be beneficial to the industry

Assessing dynamics of palm oil import demand: the case of six Asian countries

This article uses annual data to investigate the palm oil import demand in selected Asian countries (India, China, Japan, Bangladesh, Korea, and Pakistan) through using the autoregressive distributed lag (ARDL) technique. The findings of the study show that the palm oil and substitute oils prices and the national income of the importing countries are significant determinants of palm oil demand across the six models. Other factors such as biofuel mandate, trade policies, and exchange rate also proved to be important factors affecting import demand for palm oil in some of these countries

Supply and Demand Model for the Malaysian Cocoa Market

This paper investigates a system of supply, demand, and price equations for Malaysian cocoa using annual data over the period 1975-2008. Theoretically, in supply and demand models, the price variable is treated as endogenous. However, Hausman specification test result indicates that there is no simultaneity problem in the model. Thus, we estimate the system of equations utilizing the Seemingly Unrelated Regression (SUR) estimation technique which might be considered a more efficient estimator for supply and demand model of the Malaysian cocoa. The results suggest that the Malaysian cocoa production is mainly affected by the previous year production, price of cocoa beans at lag two as well as the harvested area. In the export demand equation, the real effective exchange rates is statistically significant determinant while the index of industrial production of advanced economies and the world price of cocoa are found to be insignificant. The results also suggest that both Malaysian industrial production index and domestic price of cocoa beans are key determinants of domestic demand for cocoa beans in Malaysia. Finally, the domestic price of cocoa beans is highly sensitive to its domestic consumption, lagged domestic price, and its world price