LATIN AMERICAN COUNTRIES DEMAND FOR WHEAT IMPORTS AND UNITED STATES MARKET SHARE (AGRICULTURAL TRADE, POLICY, ELASTICITIES, SEEMINGLY UNRELATED, EXCHANGE RATES)

The objectives of this study were to estimate Latin American countries excess demands for U.S. wheat, world wheat, U.S. market share, and classes of wheat. Countries included were Brazil, Venezuela, Chile, Peru, Colombia, Ecuador, Bolivia, Costa Rica, El Salvador, the Dominican Republic, and Panama. They were consistent importers of wheat from the U.S. during the time frame of this analysis (1962/63-1980/81). Estimates for Mexico were obtained from a simple recursive system covering a shorter period. The practical usage of these estimates is to support country-specific trade programs by the U.S. Each of the models for U.S. wheat, world wheat, and U.S. market share consisted of a set of twelve equations, one for each importing country. Empirical estimates were obtained by seemingly unrelated regression for each set. Border prices of wheat imports were created by adding estimates of variable transportation costs to country-specific export prices, and per capita gross domestic product adjusted for purchasing power was used as an income proxy. The U.S. share estimates were corrected for autocorrelation and heterocedasticity. The study provided evidence on the degree by which each of the variables postulated influence excess demand for wheat. These variables could be ranked according to the magnitude of their elasticities in the following sequence: per capita income, exchange rate, population, import prices, and domestic production. Price coefficients were tested for equality across countries\u27 equations, and also for income coefficients. Both tests failed leading to the rejection of the null hypothesis of equal coefficients. These results discount the credibility of estimates based on aggregation for regional or world excess demand. To maximize the cost-effectiveness of the agricultural trade programs mandated by the 1985 Farm Bill, the study recommends that the selection for eligibility of the importing countries for such programs be in accordance with their excess demand response parameter rankings