Investigation of Relationship Between World Food Prices and Energy Price: A Panel SUR Approach

Although food prices are at or near a historical low in major world markets, there is increasing concern about food security. The high food prices experienced over recent years have led to the widespread view that food price volatility has increased. In this study, factors affecting food prices are investigated for subgroups of foods such as cereals, meats, beverages, and vegetable oils, using Seemingly Unrelated Regression panel data approach with monthly world food prices from January 1994 to July 2016. Estimation results show crude oil and gasoline prices have a positive significant impact on food price subgroups such as cereals and meats. With the rise in Di-Ammonium Phosphate and Triple Superphosphate prices, the cereals, beverages, and vegetable oil prices increased. Potassium chloride fertilizer price has a positive significant effect on cereals, but in most cases, the meats and beverages’ subgroups were not affected by fertilizer prices. Also, the exchange rate had a negative significant effect on all food price subgroups