Influence of the National Gross Diesel Price Index on Agricultural and Food Price Indices along the Value Chain in Austria – A Time-Series Analysis using a VAR-Model

The following elaboration is concerned with an empirical study that is based on a project of the Austrian Institute of Economic Research (WIFO) that tries to identify a possible causal linkage between energy prices in the form of a self-created Gross Diesel Price Index on Food Price Indices of certain Food Product-Groups along the Value Chain for Austria. The steps along the value chain include the Agricultural Price Index (ACP), Im- port Price Index (IPI) and the Harmonized Index of Consumer Prices (HICP), and for all food products combined the Producer Price Index (PPId or PPI) as well. The Food Prod- uct Groups chosen were – Bread & Cereal, Oils & Fats, Meat Products and an Index of all Food Products combined of the EU´s Food Price Monitoring tool as these represent a diverse mix of important Food Products for Austria. A VAR-Model including Granger Causality Wald-tests was used as the time-series method with data ranging from January 2005 until March 2024. The results show that the crude-oil based Gross Diesel Price Index has a significant in- fluence, and granger causes most of the respective Food Price Indices along the value chain, except for Bread & Cereal ACP, Oils & Fats ACP and Food products PPI. How- ever, the results reveal a bidirectional causality for Oils & Fats and Bread & Cereal prod- ucts that can be traced back to biodiesel-production in Austria. In turns out that biodiesel is both mixed into the standard retail diesel and sold as pure biodiesel product as well and is produced latgely by products, especially seeds from the Oils & Fats and Bread & Cereal product groups. Furthermore, when the sole influences of the product groups along the value chain are considered, the ACP index shows significant influence on the HICP with positive coefficient for all product groups but Oils & Fats. At last, policy advice on sup- porting Austrian farmers further is given with past price rises of diesel in mind.