Market Behavior of Grains Exporters

This article develops and tests several models of market behavior over the 1965–81 period to identify the market behavior of each of the five largest grain exporters in rice, wheat, and coarse grains. The results show that the United States has exerted price leadership in the rice and coarse grains markets. The remaining major exporters in these markets have behaved in a manner consistent with a small-country exporter model in which their market demand is perceived to be perfectly elastic at the world price set by the dominant exporter. The results for wheat suggest a shared dominance between the United States, Canada, and Australia, with the European Community and Argentina behaving as small-country exporters. The short-run export supply curves for the five largest exporters appear to be very unresponsive to price. For rice, only Japan's exports were found to have a significant and positive response to an increase in the world export price. For wheat and coarse grains, only the United States' exports were estimated to be positively and significantly related to the export price. An important implication of the current market behavior of the major exporters is that the opportunity exists for all other exporters to sell all they can at the world price. However, a significant risk exists that the United States will stop supporting the world price through its loan rate mechanism. A provision for such a change, the crop marketing loan provision, was included in the Food Security Act of 1985 for wheat and coarse grains and has already been implemented for rice.