The relationship between spatial price transmission and geographical distance: the case of Brazil

The objectives of this research are to investigate the influence of geographical distance on the cointegration relationship in order to increase knowledge on the issue, and to indentify its role in Brazilian agricultural markets. With this intention, the cointegration framework is applied allowing for the presence of multiple structural breaks in the long run equation. The inclusion of breaks is in response to the multiple changes of the agricultural system during the period of investigation. The spatial integration is calculated between each market pair. The cointegration coefficient and geographical distance relationship is calculated by means of an OLS regression, taking into account the quality of roads and the proximity to a border or port. The effect of the distance depends on the product. In the case of rice markets, there is a weak, negative and significant relation. Concerning soybeans, the relationship is not significant. After allowing for the inclusion of breaks in the long run, the results remain unvaried. In addition, the region and a better access to export points are the main variables in the definition of the prices.cointegration, price transmission, geographical distance, structural breaks, rice, soybeans, Brazil., Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety, Labor and Human Capital,