A Study on the Influence of Oil Price Fluctuations on Agricultural Value-Added
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Recently, the volatility of oil prices has significantly increased due to various factors. This study aims to analyze the influences of oil price fluctuations on agricultural value added, with a particular focus on comparing the magnitude of ripple effects across different categories. In order to achieve this, we designated not only oil prices but also exchange rates and the prices of three grains as random variables, and developed a stochastic model that considers their correlations. When oil prices fluctuate within expected ranges, it was analyzed that agricultural value-added changes by approximately 540 billion KRW. When examined by category, it was found that fruit-bearing vegetables exhibited the largest ripple effect. As a policy alternative to alleviate the farmers’ operational risk, this study introduces margin insurance to effectively manage both the increases in input costs due to rising oil prices and the decreases in agricultural commodity prices.
Abstract
Recently, the volatility of oil prices has significantly increased due to various factors. This study aims to analyze the influences of oil price fluctuations on agricultural value added, with a particular focus on comparing the magnitude of ripple effects across different categories. In order to achieve this, we designated not only oil prices but also exchange rates and the prices of three grains as random variables, and developed a stochastic model that considers their correlations. When oil prices fluctuate within expected ranges, it was analyzed that agricultural value-added changes by approximately 540 billion KRW. When examined by category, it was found that fruit-bearing vegetables exhibited the largest ripple effect. As a policy alternative to alleviate the farmers’ operational risk, this study introduces margin insurance to effectively manage both the increases in input costs due to rising oil prices and the decreases in agricultural commodity prices.
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