Statistical modelling to examine the impact of changes in crude oil and fertiliser prices on maize prices and future forecasts in India

Abstract

AbstractThis study examines the impact of crude oil and fertiliser price changes on maize crop prices in India using monthly time series data from May 2007 to September 2022. The best‐fitted Autoregressive Integrated Moving Average model with the lowest Akaike's Information Criterion value is selected, and the Box–Ljung test is used to validate the prediction accuracy. Empirical results suggest that maize price is driven by crude oil and fertiliser prices since it has been found that maize prices are highly positively correlated with the prices of crude oil and fertiliser. Also, a strong correlation has been found between crude oil and fertiliser prices. The investigation for forecasting the next 15 months from November 2022 also revealed that maize prices showed no volatility because of a constant trend, but crude oil prices showed a declining trend, while di‐ammonium phosphate prices showed an increasing trend over the period from November 2022 to February 2023. They then declined to June 2023 but again showed an increasing trend from July 2023 to January 2024 and achieved the highest price in December 2023. Because of a constant trend, urea prices showed no volatility over the 15 months. The estimates can aid the government in formulating policies to maintain agricultural crop production and control input price changes to meet the growing population's food demands.