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Abstract
Endogenous variables in structural models of agricultural commodity markets are
typically treated as stationary. Yet, tests for unit roots have rather frequently implied that
commodity prices are not stationary. This seeming inconsistency is investigated by focusing on
alternative specifications of unit root tests. We apply various specifications to Illinois farm prices
of corn, soybeans, barrows and gilts, and milk for the 1960 through 2002 time span. The
preponderance of the evidence suggests that nominal prices do not have unit roots, but under
certain specifications, the null hypothesis of a unit root cannot be rejected, particularly when the
logarithms of prices are used. If the test specification does not account for a structural change
that shifts the mean of the variable, the results are biased toward concluding that a unit root
exists. In general, the evidence does not favor the existence of unit roots.