Factors Affecting Food Price Stability: Evidence from Turkey

This study evaluates the factors affecting the formation of agricultural commodity prices. The aim is to determine the components for ensuring food price stability and combating food inflation. In order to examine the relationship, agricultural commodity daily price volatility is analyzed with the GARCH methodology, in the periods before and after the national spot market launch in July 2019. Explanatory factors in the model are US dollar/Turkish lira, Turkish lira overnight interest rate and Brent oil return series. It is observed that; shocks in US dollar/Turkish lira returns has a positive effect on the wheat and maize price returns and increase their volatility. Contrary to the positive effect of the US dollar/Turkish lira series on wheat and maize price returns, shocks in Brent oil price returns have a negative effect on these commodities. When compared with the daily price changes within the national agricultural mercantile exchange (TMEX) with the previous decentralized commodity markets period, it has been observed that TMEX has brought stability to the market with a decreasing daily price fluctuation range and contributes to healthy price formation.