Do crop prices share common trends and common cycles?*

Abstract

Global crop prices decidedly co-move: research supporting this view abounds. What is unclear is how strong the co-movement is between them. This paper tests for a strong form of co-movement amongst global crop prices before and after the global financial crisis (GFC) using a multivariate decomposition framework based on a serial-correlation common feature. More specifically, we analyze common trends (i.e., long-run co-movement) and common cycles (i.e., short-run co-movement) amongst the global prices of five major crops: corn, palm oil, rice, soybean, and wheat. We show that corn and soybean prices are closely associated in the long and the short run—they respond similarly to persistent and transitory shocks. Furthermore, their associations have strengthened since the GFC. In contrast, the co-movement of rice prices with the other crop prices has weakened during the 2010s. Overall, the cycles are relatively muted after the GFC, indicating that the five crop prices are trend-dominated during this period; the observed prices adhere closely to their long-run trends.