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2011 | Buch

Methods to Analyse Agricultural Commodity Price Volatility

herausgegeben von: Isabelle Piot-Lepetit, Robert M'Barek

Verlag: Springer New York

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Über dieses Buch

This book examines the issue of price volatility in agricultural commodities markets and how this phenomenon has evolved in recent years. The factors underlying the price spike of 2007-08 appear to be global and macroeconomic in nature, including the rapid growth in demand by developing countries, the international financial crisis, and exchange rate movements. Some of these factors are new, appearing as influences on price volatility only in the last decade. Although volatility has always been a feature of agricultural commodity markets, the evidence suggests that volatility has increased in certain commodity markets. A growing problem is that agricultural price shocks and volatility disrupt agricultural markets, economic incentives and incomes. With increased globalization and integration of financial and energy markets with agricultural commodity markets, the relationships between markets are expanding and becoming more complex. When a crisis such as a regional drought, food safety scare or a financial crisis hits a particular market, policy-makers often do not know the extent to which it will impact on other markets and affect producer, consumer and trader decisions. Including contributions from experts at the World Bank, the Food and Agriculture Organization of the United Nations, the USDA, and the European Commission, the research developed throughout the chapters of this book is based on current methodologies that can be used to analyze price volatility and provide directions for understanding this volatility and the development of new agricultural policies. The book highlights the challenges facing policy makers in dealing with the changing nature of agricultural commodities markets, and offers recommendations for anticipating price movements and managing their consequences. It will be a practical guide for both present and future policy-makers in deciding on potential price-stabilizing interventions, and will also serve as a useful resource for researchers and students in agricultural economics.

Inhaltsverzeichnis

Frontmatter
Chapter 1. Methods to Analyse Agricultural Commodity Price Volatility
Abstract
A broad set of methods are available to analyse price volatility. However, due to specific market characteristics and policy implications, agricultural commodity price volatility cannot be analysed as financial price volatility. This chapter reviews these points and outlines the content of the book.
Isabelle Piot-Lepetit, Robert M’Barek
Chapter 2. Main Challenges of Price Volatility in Agricultural Commodity Markets
Abstract
Prices of agricultural commodities undergoing rapid adjustments were in the spotlight following the “food crises” in late 2007 and early 2008, and again more recently in summer and fall of 2010, raising concerns about increased price volatility, whether temporal or structural. Although price volatility is a normal feature of markets given the seasonal production cycle and discontinuity of supply in the face of a continuing demand, a greater uncertainty of a rapidly changing economic and natural environment contributes to and magnifies its occurrence. This chapter focuses on the main challenges of price volatility in agricultural commodity markets. We start by briefly touching upon the theoretical aspects of volatility, followed by a comparison of international and European markets to identify whether one was more affected than the other by increases in price volatility. Factors, implications and preliminary policy considerations of increased volatility follow before initial conclusions on future prospects are drawn.
Monika Tothova
Chapter 3. The Energy/Non-energy Price Link: Channels, Issues and Implications
Abstract
One key characteristic of the recent commodity price boom has been co-movement among most prices, especially between energy and non-energy commodities. Such link is often discussed in connection (or attributed) to the use of food commodities for the production of biofuels. This chapter argues that, due to agriculture’s energy-intensive nature, energy prices have played a key role even before the diversion of food commodities to the production of biofuel began. Transmission elasticity from energy to agricultural commodity prices of 0.20 is estimated for the 1960–2005 period. The econometric evidence confirms that the elasticity increased considerably when the post-2005 boom years were included in the analysis. But the chapter also finds that similar (and on some occasions larger) increases in elasticities are present in all commodity sectors, thus confirming that common factors must have played an important role during the recent boom.
John Baffes
Chapter 4. Food Price Volatility
Abstract
The high food prices experienced over recent years have led to the widespread view that food price volatility has increased. However, volatility has generally been lower over the two most recent decades than previously. Over the most recent period, volatility has been high but, with the important exception of rice, not out of line with historical experience. There is weak evidence that grains’ price volatility more generally may be increasing.
Christopher L. Gilbert, C. Wyn Morgan
Chapter 5. Empirical Issues Relating to Dairy Commodity Price Volatility
Abstract
The EU dairy industry faces an unprecedented level of change. The anticipated removal of milk quotas and the move to a less restricted global trade environment will provide the industry with both opportunities and challenges. The primary challenge will be the need for the industry to deal with more volatile prices. Active management of the risks associated with these more volatile prices will help to place the industry in a more competitive position. By quantifying the increases in EU butter and Skim Milk Powder (SMP) price volatility, this chapter demonstrates one of the consequences of the more recent reforms of EU dairy policy. Comparison with comparable world prices also provides an indication of how this volatility might evolve. This analysis employs a number of techniques to quantify the increased volatility from the simple and intuitive to more complex time series models (GARCH). In all cases increased volatility in EU dairy commodity prices is clearly evident suggesting that the challenges associated with high levels of price volatility need to be addressed as a priority.
Declan O’Connor, Michael Keane
Chapter 6. Price Volatility and Price Leadership in the EU Beef and Pork Meat Market
Abstract
This chapter investigates price dynamics of bovine and porcine production for the European Union (EU) as a whole and for each Member States (MS). The variability of production price series and the correlation between Member States price and the EU price are analysed. Furthermore, several time series models are tested in order to identify the stochastic process that generated these prices. Results show a higher dispersion of prices at the MS level. Correlation between MS prices and the EU price have increased since 2003 for bovine production and decreased for porcine production. Results are not conclusive regarding the existence of a common price process between the EU and MS prices and the leadership of the EU price in the bovine and porcine EU meat market.
Isabelle Piot-Lepetit
Chapter 7. Using Futures Prices to Forecast US Corn Prices: Model Performance with Increased Price Volatility
Abstract
A futures price forecasting model is presented which uses monthly futures prices, cash prices received, basis values (cash prices less futures) and marketing weights to forecast the season-average farm price for US corn. Performance of the model forecasts is examined using standard measures, such as mean absolute error, mean absolute percentage error and mean squared error. Tests for statistical differences between the futures model forecast and price projections from the US Department of Agriculture (USDA) are conducted using the Modified Diebold–Mariano test statistic. A measurement of price volatility identified the past 3 crop years, 2006/2007–2008/2009 with increased volatility compared to the prior 6 years, 2000/2001–2005/2006. Forecast errors from the futures forecast model increased during these volatile price years compared to the prior 6 year period which exhibited more stability. Suggestions are made to improve model price forecasts during periods of price volatility.
Linwood A. Hoffman
Chapter 8. Approaches to Assess Higher Dimensional Price Volatility Co-movements
Abstract
In this chapter two different multivariate GARCH models are used to analyse how volatility changes over time and markets. Multiple time series properties for agricultural commodities futures are analysed and non-linearity in the variance of each series is taken into account. Both implemented models are discussed in light of viability of estimation of higher dimensional time series systems. We identified patterns in volatility transmission that are of particular importance for volatility analysis and for market participants.
Jochen Schmitz, Oliver von Ledebur
Chapter 9. Price Co-movements in International Markets and Their Impacts on Price Dynamics
Abstract
The upsurges of international primary commodity prices of 1973 and 1979, the fall of the 1980s, the price recovery of the early 1990s, the drop of the end of the 1990s and the high rise of the 2000s reflect a cyclical evolution over several decades and one which stems from endogenous mechanisms. This chapter aims to review the literature regarding similarity phenomena and analyses price evolution over the last three decades. The impact of macroeconomic factors brings about co-movements of primary commodity prices. Numerous econometric tests of causality and cointegration are run to check interactions and co-movements between prices. In addition, some economic comments are suggested.
Hadj Saadi
Chapter 10. Price Transmission and Volatility Spillovers in Food Markets of Developing Countries
Abstract
We use a bivariate Vector Error Correction model to assess the transmission of price signals from selected international food markets to developing countries. We introduce a Generalized Conditional Autoregressive Heteroscedasticity (GARCH) effect for the model’s innovations in order to assess volatility spillover between the world and domestic food markets of Ethiopia, India and Malawi. Our results point out that short-run adjustment to world price changes is incomplete in Ethiopia and Malawi, while volatility spillovers are significant only during periods of extreme world market volatility. The problem in these countries is one of extreme volatility due to domestic, rather than world market shocks. In India, the analysis supports relatively rapid adjustment and dampened volatility spillovers which are by large determined by domestic policies.
George Rapsomanikis, Harriet Mugera
Chapter 11. Global Food Commodity Price Volatility and Developing Country Import Risks
Abstract
The world food price spike of 2007–2008 raised to the fore the issues of how countries can manage their basic staple food imports in times of crises. There are many risks to food imports, ranging from price risks to risks of non-performance and hence threats to domestic food supplies. The chapter first provides a review of the risks and food import access problems faced by various low and middle income net food staple importing countries and reviews pertinent policies to deal with them. A short review of some institutional issues in food importing is given to introduce more detailed discussion of food import risk management. Then a proposal for a food import financing facility designed to alleviate the financing constraint of many developing food-importing countries is presented.
Alexander Sarris
Chapter 12. Dealing with Volatility in Agriculture: Policy Issues
Abstract
The chapter illustrates instruments available to deal with volatility, indicating advantages and disadvantages based on implementation experience. The role of market instruments as a product safety-net and that of decoupled payments is to make farms less vulnerable to fluctuations in prices and to provide an income safety-net independent of the market situation. Current CAP instruments need to be adjusted to achieve the objectives of market stability in light of the medium-term market perspectives, in the most effective and efficient way. A concluding paragraph indicates broadly what type of instruments could be suitable in a post-2013 context.
Beatriz Velazquez
Backmatter
Metadaten
Titel
Methods to Analyse Agricultural Commodity Price Volatility
herausgegeben von
Isabelle Piot-Lepetit
Robert M'Barek
Copyright-Jahr
2011
Verlag
Springer New York
Electronic ISBN
978-1-4419-7634-5
Print ISBN
978-1-4419-7633-8
DOI
https://doi.org/10.1007/978-1-4419-7634-5