Methods to Analyse Agricultural Commodity Price Volatility

248 Pages·2011·2.53 MB·English

by  Isabelle Piot-Lepetit

Methods to Analyse Agricultural Commodity
Price Volatility

·
Isabelle Piot-Lepetit Robert M’Barek
Editors
Methods to Analyse
Agricultural Commodity
Price Volatility
Foreword by John Bensted-Smith
123
Editors
IsabellePiot-Lepetit RobertM’Barek
EuropeanCommission EuropeanCommission
JointResearchCentre JointResearchCentre
InstituteforProspectiveTechnological InstituteforProspectiveTechnological
Studies Studies
EdificoExpo,c/IncaGarcilaso3 EdificoExpo,c/IncaGarcilaso3
E-41092 Seville,Spain E-41092 Seville,Spain
[email protected] [email protected]
ISBN978-1-4419-7633-8 e-ISBN978-1-4419-7634-5
DOI10.1007/978-1-4419-7634-5
SpringerNewYorkDordrechtHeidelbergLondon
LibraryofCongressControlNumber:2011926591
©SpringerScience+BusinessMedia,LLC2011
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Foreword
Afteradecade-longperiodofrelativestagnationinpricesofmainagriculturalcom-
modities, price fluctuations in the last 4 years have highlighted the need for more
investigationsintothetopicofagriculturalcommoditypricevolatility.Infact,itnow
hasaprominentplaceonthepolicy-makingagenda.
Price changes have always been a feature of agricultural markets, as market
clearingconditionsrequirethatsupplymatchesdemand.
A more recent problem is that agricultural price shocks and volatility cause
uncertaintyamongmarketactors,thuspreventingthemarketfromfunctioningprop-
erly. Driven by the increased globalisation and the integration of financial and
energymarketswithagriculturalcommoditymarkets,therelationshipsbetweenall
sectorsoftheeconomyareevolvingandbecomingmorecomplex.Whenadisrup-
tion,suchasaregionaldrought,foodsafetyalertorfinancialcrisis,hitsaparticular
market, the direction and magnitude of the impacts are not foreseeable. Will it
impactonothermarketsandaffectproducer,consumerandtraderdecisions?
Understanding the nature of agricultural commodity price volatility, antici-
pating its emergence and managing its consequences are now more than ever
of considerable interest for improving agricultural market analysis and policy
development.
To this end, the European Commission’s Joint Research Centre – Institute for
ProspectiveTechnologicalStudies(IPTS)isengagedintheanalysisofpricevolatil-
ityinthecontextofagriculturalandtradepolicy.Thisvolumeofworkshoppapers,
whichIampleasedtointroduce,isonecontributionarisingfromthecurrentwork
agenda.
Seville,Spain JohnBensted-Smith
v

Preface
This book is a collection of scientific papers on topics relevant to the research
fieldofagriculturalpricevolatilityanalysis.Contributionsfromthisbookwerefirst
developedaspresentationsataninternationalworkshoporganisedbytheEuropean
Commission’s Joint Research Centre – Institute for Prospective Technological
Studies (IPTS) on “Methods to Analyse Price Volatility” held on 28–29 January
2010inSeville,Spain.
Manyconferences,publications,reportsandworkshopshavefocusedonthedra-
maticcommoditypriceincreasesfrom2007tomid-2008.Thesecontributionshave
tried to identify the known and new factors driving agricultural commodity price
changessuchastheinterdependencebetweenenergyandagriculturalmarkets,the
consequencesofthedevelopmentofbiofuels,thelinkagebetweenthedepreciation
of the US dollar and agricultural commodity prices, the role of financial markets,
andtodiscusspolicyresponses.
This book provides an overview of methodologies that can be implemented for
improvingtheanalysisandforecastofmarketdevelopments.Itdiscusseshowcur-
rentmodellingtoolsusedforpolicyanalysescanbeenhancedinordertointegrate
pricedynamics. Finallyitalsohighlights challenges faced bypolicy makers when
dealingwiththechangingnatureofagriculturalcommoditiesmarkets.
We would like to express our gratitude to all those who have contributed to
this book either by writing a chapter or by discussing the presentations during the
workshop.
WealsowouldliketothankAnnaAtkinsonforhersupportintheorganisingof
theworkshopandtheeditingofthebook.
Seville,Spain IsabellePiot-Lepetit
RobertM’barek
vii

Contents
1 MethodstoAnalyseAgriculturalCommodityPriceVolatility . . . 1
IsabellePiot-LepetitandRobertM’Barek
2 Main Challenges of Price Volatility in Agricultural
CommodityMarkets . . . . . . . . . . . . . . . . . . . . . . . . . . 13
MonikaTothova
3 The Energy/Non-energy Price Link: Channels, Issues
andImplications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
JohnBaffes
4 FoodPriceVolatility . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ChristopherL.GilbertandC.WynMorgan
5 EmpiricalIssuesRelatingtoDairyCommodityPriceVolatility . . 63
DeclanO’ConnorandMichaelKeane
6 Price Volatility and Price Leadership in the EU Beef
andPorkMeatMarket . . . . . . . . . . . . . . . . . . . . . . . . . 85
IsabellePiot-Lepetit
7 UsingFuturesPricestoForecastUSCornPrices:Model
PerformancewithIncreasedPriceVolatility . . . . . . . . . . . . . 107
LinwoodA.Hoffman
8 ApproachestoAssessHigherDimensionalPriceVolatility
Co-movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
JochenSchmitzandOlivervonLedebur
9 Price Co-movements in International Markets
andTheirImpactsonPriceDynamics . . . . . . . . . . . . . . . . 149
HadjSaadi
10 Price Transmission and Volatility Spillovers in Food
MarketsofDevelopingCountries . . . . . . . . . . . . . . . . . . . 165
GeorgeRapsomanikisandHarrietMugera
ix