Vertical and Horizontal Price Linkages and Market Concentration in the U.S. Wheat Milling Industry

Increased concentration in the U.S. wheat milling industry has raised concerns that noncompetitive pricing behavior may have affected vertical and spatial price linkages. This investigation uses cointegration testing procedures to assess horizontal and vertical price linkages in the U.S. wheat market. Linkages between wheat and flour prices and among a group of regional wheat prices are evaluated. The results suggest a strong and persistent long-run equilibrium relationship among wheat and flour prices. In addition, the results offer evidence that the vertical linkages have strengthened as the market has become more concentrated.