Chat with us, powered by LiveChat Plot the relationship between agricultural commodity prices (Farm Product Price Index) & retail food prices (Food CPI). Do this for Jan 2020 through to July March 2022. Pleas | Wridemy

Plot the relationship between agricultural commodity prices (Farm Product Price Index) & retail food prices (Food CPI). Do this for Jan 2020 through to July March 2022. Pleas

Plot the relationship between agricultural commodity prices (Farm Product Price Index) & retail food prices (Food CPI). Do this for Jan 2020 through to July March 2022. Pleas

follow the pdf step and answer the questions.

Note:

  • The following changes have been made to question 2a
    • Plot the relationship between agricultural commodity prices (Farm Product Price Index) & retail food prices (Food CPI). Do this for Jan 2020 through to July March 2022.

    Please submit the following:

  1. Your typed answers as a PDF file
  2. Your completed excel file

Need some Excel skills and need economic analysis skills

Assignment 1 (FRE 501) Name & Student ID:

Instructions: i. Data for the questions are provided in the accompanying excel file

ii. Please submit the following on Canvas: o Your typed answers as a PDF file o Your completed excel file o Your class participation record (Lectures 1 to 4)

Question 1: (23 marks total)

a. Plot world wheat prices from Jan 2015 to July 2022. (1) b. On the same graph, plot inflation rates over the same period and on the secondary axis

(view example on the excel file). (1) c. What is the relationship between the two? Run a regression to show the relationship

statistically, wheat prices as the independent variable and inflation as the dependent variable. (2)

d. State the month when inflation really begins to take off (increase)? (1) e. Now re-run the regression in two parts, first for the period from Jan 2015 to Dec 2020;

second from Jan 2021 to July 2022. Explain your results. (3) Background Information:

Use Canada as an example of a wheat producer/exporter. Note that the production of wheat each year requires farmers to decide in March-April which crops they will grow. If they wish to produce more wheat, they will allocate more of their land to wheat and away from the alternative crop they would otherwise be growing (e.g., canola). In anticipating their wheat production, they will have to acquire adequate supplies of fertilizer and other farm inputs, typically making purchases also in those early spring months. The wheat price will be determined by the world supply and demand. Some supplies of wheat will be determined even earlier if there is planting of winter wheat or an earlier growing season.

f. Describe the process by which inflation will affect Canadian wheat prices. (3) More information:

Suppose inflation in wheat producing countries starts to rise in (Canadian data follows) July 2021, jumping from 3.1 to 3.7%, and only begins to rise seriously in Jan 2022 (monthly inflation hits 5%), rising each month to June (8.1%). By planting decision time, inflation is running at annual rate of 5-7% (year over year, calculated each month.

g. How will that affect wheat prices over the period from January to July 2022 that we have so far observed? Putting this differently, if there was no significant inflation in 2021 through to date, how would this have changed the observed rise in global wheat prices? (3)

h. How would the actual observed inflation affect world wheat prices looking forward (in the future), ignoring other factors in the wheat market such as the war in Ukraine? (2)

i. Assume that fertilizer input costs account for 30% of total revenues. If fertilizer costs doubled, and if wheat prices increased by 50%, we wish to calculate the net effect on profits and planting decisions (these are roughly realistic numbers for spring 2022).

i. Calculate the effect on net profit or earnings before taxes for “Wheat-Hard Red Spring” (The relevant financial data can be found on Page 4 of the following document: https://www.gov.mb.ca/agriculture/farm- management/production-economics/pubs/cop-crop-production.pdf) (3)

ii. What is the effect on farmer’s planting decision from this change in profit? i.e., will they increase wheat plantings, given both an increase in fertilizer costs and an increase in the wheat price? (2)

j. Now show how this example of the long term effect of inflation will likely affect wheat prices (for late 2022, 2023)? (2)

Question 2: (9 marks total)

a. Plot the relationship between agricultural commodity prices (Farm Product Price Index) & retail food prices (Food CPI). Do this for Jan 2020 through to July 2022. (1)

i. What is the relationship between the two? (1) b. Conduct regressions and interpret the corresponding R Squared values

i. Food CPI in period t-1 (Independent variable) on Farm Product Price Index in period t (Dependent variable). (2)

ii. Farm Product Price Index in period t-1 (Independent variable) on Food CPI in period t (Dependent variable). (2)

iii. Contemporaneous effects, Farm Product Price Index in period t (Independent variable) on Food CPI in period t (Dependent variable). (1)

c. Give some economic arguments for why one direction of causation would be more plausible than another (comparing i. with ii.)? (2)

Question 3: (8 marks total)

a. On excel, convert the monthly Farm Product Price Index & Food CPI data into a quarterly series. (1)

b. Create 2 new data series that depicts the quarterly change in both Farm Product Price Index & Food CPI. (2)

c. Plot the quarterly percentage change in Farm Product Price Index & Food CPI from Q2- 2000 to Q1-2022. (1)

i. Comment on the relationship between the quarterly percentage change in Farm Product Price Index and Food CPI. (1)

ii. Provide reasons for the difference in volatility between the quarterly percentage change in Farm Product Price Index & Food CPI. (3)

,

Qn 1

Data Sources
Wheat Prices: World Bank Commodities Price Data (The Pink Sheet) https://www.worldbank.org/en/research/commodity-markets
Canadian Inflation Rate: Bank of Canada https://www.bankofcanada.ca/rates/price-indexes/cpi/
Period Wheat, US HRW ($/mt) Canadian Inflation Rates Example
2015-Jan 248 1.0%
2015-Feb 237 1.0%
2015-Mar 231 1.2%
2015-Apr 223 0.8%
2015-May 215 0.9%
2015-Jun 210 1.0%
2015-Jul 197 1.3%
2015-Aug 180 1.3%
2015-Sep 173 1.0%
2015-Oct 173 1.0%
2015-Nov 177 1.4%
2015-Dec 189 1.6%
2016-Jan 193 2.0%
2016-Feb 187 1.4%
2016-Mar 191 1.3%
2016-Apr 187 1.7%
2016-May 172 1.5% Answer
2016-Jun 173 1.5%
2016-Jul 152 1.3%
2016-Aug 149 1.1%
2016-Sep 151 1.3%
2016-Oct 152 1.5%
2016-Nov 151 1.2%
2016-Dec 142 1.5%
2017-Jan 153 2.1%
2017-Feb 155 2.0%
2017-Mar 154 1.6%
2017-Apr 166 1.6%
2017-May 180 1.3%
2017-Jun 190 1.0%
2017-Jul 202 1.2%
2017-Aug 171 1.4%
2017-Sep 179 1.6%
2017-Oct 176 1.4%
2017-Nov 180 2.1%
2017-Dec 184 1.9%
2018-Jan 192 1.7%
2018-Feb 192 2.2%
2018-Mar 192 2.3%
2018-Apr 214 2.2%
2018-May 214 2.2%
2018-Jun 219 2.5%
2018-Jul 218 3.0%
2018-Aug 237 2.8%
2018-Sep 212 2.2%
2018-Oct 213 2.4%
2018-Nov 204 1.7%
2018-Dec 211 2.0%
2019-Jan 210 1.4%
2019-Feb 219 1.5%
2019-Mar 206 1.9%
2019-Apr 200 2.0%
2019-May 200 2.4%
2019-Jun 206 2.0%
2019-Jul 196 2.0%
2019-Aug 181 1.9%
2019-Sep 190 1.9%
2019-Oct 200 1.9%
2019-Nov 203 2.2%
2019-Dec 211 2.2%
2020-Jan 225 2.4%
2020-Feb 215 2.2%
2020-Mar 209 0.9%
2020-Apr 219 -0.2%
2020-May 206 -0.4%
2020-Jun 198 0.7%
2020-Jul 222 0.1%
2020-Aug 223 0.1%
2020-Sep 248 0.5%
2020-Oct 272 0.7%
2020-Nov 273 1.0%
2020-Dec 269 0.7%
2021-Jan 289 1.0%
2021-Feb 289 1.1%
2021-Mar 273 2.2%
2021-Apr 281 3.4%
2021-May 297 3.6%
2021-Jun 286 3.1%
2021-Jul 294 3.7%
2021-Aug 325 4.1%
2021-Sep 338 4.4%
2021-Oct 355 4.7%
2021-Nov 379 4.7%
2021-Dec 377 4.8%
2022-Jan 374 5.1%
2022-Feb 391 5.7%
2022-Mar 486 6.7%
2022-Apr 495 6.8%
2022-May 522 7.7%
2022-Jun 460 8.1%
2022-Jul 383 7.6%

Qn 2

Data Sources
Statistics Canada. Table 32-10-0098-01  Farm product price index (FPPI), monthly https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3210009801
Statistics Canada. Table 18-10-0004-01  Consumer Price Index, monthly, not seasonally adjusted https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000401
Date Farm Product Price Index Food CPI
Jan-20 132.4 153.5 Question 2a)
Feb-20 132.4 152.9
Mar-20 132.7 152.8
Apr-20 130.5 154
May-20 134.5 154.3
Jun-20 133 154.8
Jul-20 132.5 155
Aug-20 132.9 153.8
Sep-20 134.3 152.6
Oct-20 137.3 153.3
Nov-20 138.2 153.9
Dec-20 139.5 153.6
Jan-21 143 155
Feb-21 147.9 155.6
Mar-21 153.1 155.5
Apr-21 158.5 155.4 Question 2bi)
May-21 158.6 156.6
Jun-21 164.4 156.8
Jul-21 167.5 157.6
Aug-21 163.8 158
Sep-21 167 158.5
Oct-21 167.4 159.2
Nov-21 173.6 160.7
Dec-21 175.7 161.6
Jan-22 185.7 163.9
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