Showing papers on "Commodity published in 2002"

Equilibrium Pricing and Optimal Hedging in Electricity Forward Markets

Abstract: Spot power prices are volatile and since electricity cannot be economically stored, familiar arbitrage-based methods are not applicable for pricing power derivative contracts. This paper presents an equilibrium model implying that the forward power price is a downward biased predictor of the future spot price if expected power demand is low and demand risk is moderate. However, the equilibrium forward premium increases when either expected demand or demand variance is high, because of positive skewness in the spot power price distribution. Preliminary empirical evidence indicates that the premium in forward power prices is greatest during the summer months. WHOLESALE POWER MARKETS, where producers trade electricity among themselves and with power-marketing and power-distribution companies, have grown rapidly in recent years. 1 The U.S. Department of Energy ~2000! reports that U.S. wholesale power transactions during 1999 amounted to approximately 2.6 billion megawatt hours ~MWh!, or about $85 billion. The U.S. wholesale power market is soon likely to comprise the world’s largest commodity market. Electricity as a commodity has many interesting characteristics, most of which stem from the fact that it cannot be economically stored. 2 Market

American Agriculture in the Twentieth Century: How It Flourished and What It Cost

Abstract: Preface 1. Introduction 2. Technology 3. Farms 4. Farm Communities 5. Markets 6. Government I: Public Investment and Regulation 7. Government II: Commodity and Trade Policy 8. Explanations 9. Regions and States 10. Counties 11. Findings and Policy Implications References Index

Grounded capital: venture financing and the geography of the Internet industry, 1994–2000

Abstract: Despite the rhetoric in the popular and business press trumpeting the removal of ‘the limitations of geography’, a number of researchers have demonstrated that rather than simply dispersing, the Internet in fact exhibits an uneven spatial pattern throughout the United States and world. Using a combination of interview and regression methodologies, this article argues that the regional distribution of venture capital investing played a central role in determining the location of new Internet startups. This was largely due to the premium that entrepreneurs placed on one of the hallmarks of venture capital, i.e. speed, and the reliance of venture capitalists upon local networks and knowledge for their investments.The ability to provide these types of value-added inputs in a timely manner is greatly assisted by geographic proximity. Rather than being an easily moved and fungible commodity, venture capital investing depends upon non-monetary inputs such as knowledge about possible investments and prefers to be close to companies in order to monitor and assist them.Thus, despite telecommunications technologies and global financial markets that have vastly expanded the geographic range of economic interaction, regions remain central to economic development in the current economy.

Electronic spread trading tool

Abstract: A versatile and efficient electronic spread trading tool to be used when buying and selling comparable commodities either simultaneously or in conjunction with one another. The spread trading tool involves a method of displaying, on an electronic display device, the market depth of a plurality of commodities including an anchor commodity and a non-anchor commodity, where the method includes dynamically displaying a plurality of bids and asks in the market for the commodities, statically displaying prices corresponding to those plurality of bids and asks, where the bids and asks are displayed in alignment with the prices corresponding thereto, displaying an anchor visual indicator corresponding to and in alignment with a desired price level of the anchor commodity, displaying a price level indicator corresponding to and in alignment with a price level of the non-anchor commodity. Based on an unhedged position, and taking into account the parameters and spread price point values, as determined by the trader, price level indicators are calculated and displayed, which provide a visual representation of where the trader should buy and sell the applicable commodities. The price level for the price level indicator in the non-anchor commodity is determined based upon said desired price level of the anchor commodity. The price level indicator also includes a first visual indicator corresponding to and in alignment with a first price level of the non-anchor commodity and a second visual indicator corresponding to and in alignment with a second price level of the non-anchor commodity.

Asset Storability and Price Discovery of Commodity Futures Markets: A New Look

Abstract: This paper examines the price discovery performance of futures markets for storable and nonstorable commodities in the long run, allowing for the compounding factor of stochastic interest rates. The evidence shows that asset storability does not affect the existence of cointegration between cash and futures prices and the usefulness of future markets in predicting future cash prices. However, it may affect the magnitude of bias of futures markets' estimates (or predictions) for future cash prices. These findings have several important implications for commodity production decision-making, commodity hedging and commodity price forecasting.

Global Commodity Chains and African Export Agriculture

Abstract: The last twenty years or so have seen a new conjuncture in international trade in tropical agricultural products. That conjuncture combines both changes in the organization of the (Northern) manufacturer and consumer segments of the global commodity chains for those products, and in marketing arrangements in their (Southern) countries of origin, associated with structural adjustment and liberalization. This introductory essay provides the context for the case studies that follow, first by introducing some of the key concepts and analytical issues in the global commodity chain (GCC) approach and other recent relevant literature such as the French ‘convention’ theory. It then sketches an historical framework for examining international trade in tropical agricultural products, with brief illustrations of the specific trajectories of Africa and some African countries within that framework. Finally, it shows how a number of issues are explored in the case studies presented, including how current changes might affect the future prospects of smallholder (‘peasant’) production of tropical export crops.

Environmental policies for a multifunctional agricultural sector in open economies

Abstract: Summary This paper derives the efficient set of policies for a multifunctional agriculture and relates them to trade. In general, efficiency cannot be achieved through simple output subsidies, but the efficient policies to move closer to socially optimal levels of multifunctional, non-commodity outputs may also change commodity output levels. Accounting for international price effects, large importing and exporting nations have incentives to favour subsidies for non-commodity outputs and to oppose them, respectively, regardless of the true value of these agriculturally related public goods. The policy incentives are illustrated through a stylised simulation of US agriculture.

Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade

Abstract: Gravity model explanations of trade volumes frequently include dummy variables to account for the commonality of language among trading partners. In this paper we use a data set for the number of people in a country who speak English as a first language or English as a second language (Crystal, 1997) as an indicator of the ease with which trade with the United States occurs. Controlling for commodity fixed effects we use SITC three digit industry data centred on 1995 United States bilateral trade with 33 countries to determine the effect of the degree of language commonality on bilateral trade. Both English as a first language and English as a second language are found to be less important for exports than for imports. This is true for all three digit industries as well as when the specific industry groups identified in Rauch (1999) are considered.

Islamic finance : innovation and growth

Abstract: The book examines Islamic finance and Sharia compliant structures in the retail and private banking sector; trade and commodity finance; project finance; leasing and property finance; corporate finance; and risk management and concludes with a discussion of challenges the sector faces.

Commodity Price Volatility, Vulnerability and Development

Abstract: This article examines the meaning and consequences of the developing countries’ vulnerability to the volatility of commodity prices. It first considers how to define and measure a country’s shocks and exposure arising from commodity price volatility in order to identify structural as distinct from policy vulnerability. The main channels through which price vulnerability influences economic growth are then presented. Finally, the policy implications for development aid, its allocation and design, are outlined. It is found that, while structural vulnerability is bad for growth, a policy of openness contributes to resilience. With the right rules, aid could play an important growth-enhancing and poverty-reducing role if allocated at least partly on the basis of vulnerability.

Grounded Capital: Venture Financing and the Geography of the Internet Industry, 1994-2000

Abstract: Despite the rhetoric in the popular and business press trumpeting the removal of `the limitations of geography`, a number of researchers have demonstrated that rather than simply dispersing, the Internet in fact exhibits an uneven spatial pattern throughout the United States and world. Using a combination of interview and regression methodologies, this article argues that the regional distribution of venture capital investing played a central role in determining the location of new Internet startups. This was largely due to the premium that entrepreneurs placed on one of the hallmarks of venture capital, i.e. speed, and the reliance of venture capitalists upon local networks and knowledge for their investments. The ability to provide these types of value-added inputs in a timely manner is greatly assisted by geographic proximity. Rather than being an easily moved and fungible commodity, venture capital investing depends upon non-monetary inputs such as knowledge about possible investments and prefers to be close to companies in order to monitor and assist them. Thus, despite telecommunications technologies and global financial markets that have vastly expanded the geographic range of economic interaction, regions remain central to economic development in the current economy.

Method and system for insuring users of electronic trading systems or exchanges and traditional established commodity exchanges against weather-related risks and hazards

Abstract: Method and system for bundling a weather-related risk management product to the trading of commodities, such as agriculture, food, electricity, natural gas, oil and other products being traded through independent electronic commerce exchanges including business-to-consumer, business-to-business and traditional established commodity exchanges. A weather-related insurance product is created for a commodity which will specify the weather-related risk premium and compensation to be paid if certain defined events occur. The exchange offers the insurance product to its members, and for those that purchase the insurance product, a premium is added to the cost for each transaction in which the member is a party. By bundling a weather-related insurance product together with each trade or transaction, the weather-related risk premium is incorporated as an added transaction cost at the time the trade is confirmed. The amount of premium paid by each trading party may be accumulated and recorded as “weather credits”. Pursuant to the terms and conditions of the insurance product which vary depending upon the commodity and the risks being covered, different amounts of weather credits are required in order to obtain compensation for a weather-related incident. As such, insurance for weather-related risk is made easily and readily available to all buyers and sellers regardless of the platform used for trading.

Basics of electricity derivative pricing in competitive markets

Abstract: This paper studies the application of the available financial theory to the deregulated electricity market. The special characteristics of electricity make the market different from all other commodity markets. The paper introduces a coherent framework for the assets and instruments in the electricity markets in the financial tradition. Properties of the instruments that are available in the Scandinavian electricity market are studied in more detail.

Consumption of Economic Information in Agriculture

Abstract: We develop a model of decision makers’ demand for agricultural economic information services. This modeltreats choice of externaldecision-support services as a function of actors’ assessment of how alternative investments in information complement their internal competencies. Data from a survey in four commodity systems are used to evaluate hypotheses as to how human capital, and functional role of actors in commodity systems affect demand for variously formatted information. By focusing on three axes of heterogeneity—diversity among decision makers, information service providers, and information—we are abl e to identify key structuraland functionalrel ationships in agricultural economic information systems.

An overview of a free–market approach to climate change and conservation

Abstract: This paper describes the convergence of environmental and financial markets, reviews the evolution of market-based environmental programmes as an example of the seven-stage evolutionary process witnessed in a variety of markets and summarizes the emergence of greenhouse-gas-mitigation markets and their potential role in advancing land stewardship, biodiversity and other environmental services. Emissions trading has been developed to meet the demand to reduce pollution while avoiding economic disruption. Consistent with the seven-stage pattern of market evolution, the US programme to reduce the damage from acid rain established a standardized environmental commodity, developed 'evidence of ownership' necessary for financial instruments and provided the infrastructure to efficiently transfer title. The success of the system in reducing pollution at low cost has provided a model for other market-based environmental protection initiatives. The demand for cost-effective action to reduce the threat of climate change has initiated the same evolutionary process for markets to reduce greenhouse-gas emissions. Many of the land- and forest-management practices that can capture and store atmospheric CO(2) can also provide other environmental benefits, such as biodiversity preservation and enhanced water quality. The presence of a carbon-trading market will introduce a clear financial value for capture and mitigation of CO(2) emissions, thus introducing a new source of funding for land stewardship and forest rehabilitation. The market is now emerging through a variety of 'bottom-up' developments being undertaken through governmental, multilateral, private-sector and non-governmental-organization initiatives. The extension of markets to other emerging environmental issues is now underway, and the linkages between environmental sustainability and capital markets are being more deeply understood. The early evidence indicates that environmental sustainability can be compatible with maximization of shareholder value.

Is Oligopoly a Condition of Successful Privatization? The Case of Cotton in Zimbabwe

Abstract: Zimbabwe embarked on market liberalization in the early 1990s, leading towards increasing participation of private capital in the agricultural sector. This paper examines the emergent shape of the private marketing chain for cotton in Zimbabwe, based on fieldwork conducted in the 1999-2001 cotton marketing seasons. The privatization of the cotton marketing board replaced state monopoly with private oligopoly and competition is still seriously underdeveloped, especially on price. However, because of a concentrated market and collective private action, important aspects of earlier systems of coordination have been maintained, preventing downgrading of Zimbabwean cotton lint after liberalization. The paper concludes with a discussion about (absence of) competition and commodity system sustainability in liberalized markets.

Global food trade and consumer demand for quality

Abstract: Section I: Overview and Conceptual Foundation. 1. Issues in Demand for Quality and Trade J.-C. Bureau, et al. 2. A Great Transformation in World Trade Law: Can The WTO Stay Afloat? D.G. Victor, R.U. Weiner. 3. Unifying Two Frameworks for Analyzing Quality and Quality Assurance for Food Products J.A. Caswell, et al. 4. LDC Food Exports and Food Safety Standards in High-Income Countries: What Role for the Public Sector in Overcoming Barriers to Trade? L.J. Unnevehr. Section II: Case Studies. 5. Potential Implications of Animal Welfare Concerns and Public Policies in Industrialized Countries for International Trade D. Blandford, et al. 6. Response to a Food Safety Problems in Produce: A Case Study of a Cyclosporiasis Outbreak L. Calvin, et al. 7. A Case Study of Beef Production Andexportin Uruguay M.I. Marshall. Section III: Specific Issues and Methodological Challenges. 8. Product Differentiation, Sanitary Barriers, and Arbitrage in World Poultry Markets D. Orden, et al. 9. Price Policies and the Domestic and International Distribution of Commodity Quality: Theory and Application to EU Wheat J.M. Alston, J.S. James. 10. The Impacts of Labeling on Trade in Goods that may be Vertically Differentiated According to Quality B. Roe, I. Sheldon. 11. Labeling Biotech Foods: Implications for Consumer Welfare and Trade E. Golan, F. Kuchler. 12. Consumer Effects of Harmonizing International Standards for Trade in Organic Foods L. Lohr, B. Krissoff. 13. The Public Provision of Information: A Welfare Analysis of European Products with Geographical Indications and Products with Designations of Origin A.M. Zago, D. Pick. Index.

NAFTA’s and CUSFTA’s Impact on North American Trade

Abstract: This paper finds that NAFTA and CUSFTA have had a substantial impact on North American trade. The paper focuses on where the US sources its imports of almost 5,000 different commodities and compares this to where the European Union (EU) sources its imports of the same commodities. It identifies the impact of NAFTA using a differences in differences strategy, exploiting the substantial variation across commodities and time in the US tariff preference given to goods produced in Canada and Mexico. The paper finds that the recent rapid growth in Mexico’s share of US trade would have been much slower without NAFTA while Canada’s share may not have increased without CUSFTA. Useful products of the empirical work are estimates of consumer willingness to substitute between different varieties of a commodity, an important parameter in welfare analysis of trade liberalization. Estimated average elasticities of substitution typically range from 4 to 7. Elasticities of this magnitude imply that even modest trade liberalizations will have a pronounced effect on trade volumes. One alarming result is that NAFTA may have produced substantial trade diversion, because the largest tariff preferences are often in industries where imports from outside North America represent a substantial proportion of domestic absorption. ∗I would particularly like to thank my advisors, Daron Acemoglu, Rudi Dornbusch and Jaume Ventura. Thanks are also due to Mark Aguiar, Christian Broda, Gita Gopinath, Roberto Rigobon, Alwyn Young and participants at seminars and lunches at Chicago GSB, EIIT Conference 2001, Federal Reserve Bank of New York, University of Michigan, MIT and University of Pennsylvania. All errors are my own.

From Commodity Marketing to Category Management: Insights from the Waitrose Category Leadership Program in Fresh Produce

Abstract: Looks at how Waitrose deals with commodity marketing and category management by examining its category leadership strategy, which aims to reduce costs and align its network to the needs of the consumer. Seeks to shed light on how this was achieved and the key lessons to be learned from this procurement strategy. Concludes that the category leadership strategy requires a fundamental shift in the role of the retailer and supplier as well as a redesign of the performance measurement systems, but once these are achieved there are significant and guaranteed rewards.

Optimal Commodity Promotion when Downstream Markets are Imperfectly Competitive

Abstract: We investigate the optimal collection and expenditure of funds for agricultural commodity promotion in markets where the processing and distribution sectors may exhibit oligopoly and/or oligopsony power. The conditions that characterize optimal advertising intensity under perfect competition for funds generated from either per-unit or lump-sum taxes do not, in general, hold when marketing is imperfectly competitive. Simulation analyses show that imperfect competition always reduces farmers' optimal advertising expenditure and that an imperfectly competitive marketing sector may capture half or more of the benefits from the funds that are expended. Copyright 2002, Oxford University Press.

Resource sustainability in commodity systems: the sawmill industry in the Northern Forest

Abstract: Many natural resource-based commodity systems exhibit a trio of undesirable behaviors—price instability, resource unsustainability, and inequity among people along the commodity chain. In this article we share findings from a modeling project that focuses primarily on the second problem, unsustainability, in the forest products economy and forest ecosystem of the Northeastern United States. The model shows the structural potential for lumber industry capacity to overshoot the timber resource of the regional forest. Many of the policies commonly advocated in response to resource shortage, such as boosting mill efficiencies and eliminating log exports, appear unlikely to solve the problem. We identify several policies with the potential to help sustain both the industry and resource base. We also share insights on how to design a modeling and intervention process when addressing policy problems for which no single organization has direct responsibility. Finally, we consider ways to navigate through three prevalent “defensive routines”—denial, resignation, and despair—that are often barriers to constructive discussion on how to address potential limits to growth. Copyright © 2002 John Wiley & Sons, Ltd.

Agricultural policy for the 21st century.

Abstract: Farm Commodity Programmes - Essential Safety Net or Corporate Welfare? Agricultural Policy - Pre- and Post-FAIR Act Comparisons The Content of Farm Policy in the 21st Century An Empirical Analysis of the Farm Problem Income Variability of the U.S. Farm Sector and Public Policy Crop Insurance Coalitions and Competitiveness - Why Has the Sugar Programme Been Resilient? Rational Policy Processes for a Pluralistic World The Changing Economics of Agriculture and the Environment Farmland is Not Just for Farming Anymore - The Policy Trends Kuznets Curves For Environmental Degradation and Resource Depletion Competing Paradigms in the OECD and their Impact on the WTO Food Security - Trade and Agricultural Commodity Policy.

The Role of Value‐at‐Risk in Purchasing: An Application to the Foodservice Industry

Abstract: SUMMARY Value-at-Risk (VaR) estimates the downside risk of a portfolio of market-priced assets at a particular confidence level over a specified time horizon. This article is a tutorial that introduces purchasing managers to the concept of VaR and its potential applications in the purchasing process. It discusses estimation alternatives and issues, and then examines and highlights the role of VaR in the context of a commodity end user with a specific example for a foodservice business. Further, the practical implementation issues of VaR in a corporate environment in general and the purchasing function in particular are discussed. The example and discussions are widely applicable to any commodity end user (e.g., energies, metals, or food-related commodities), providing potential applications to practitioners and research ideas to academics.

Multifunctional Agriculture and Domestic/International Policy Choice

Abstract: The concept of multifunctionality, in which agriculture is viewed as a source of both commodity and non-commodity outputs, has stimulated debate on the desirability of further trade liberalization. We explore the economics of multifunctionality and its policy implications. We argue for a new policy approach in which land and natural resource managers are remunerated for positive non-commodity outputs and penalized for negative outputs. This would require devolution in policy implementation from the centre to the local level. Such an approach would permit countries to achieve broader social objectives, while at the same time continuing to pursue trade liberalization.

Method and system for accurately forecasting prices and other attributes of agricultural commodities

Abstract: Using a general-purpose computer, the method and system of the present invention enables the forecasting of agricultural commodity prices and amounts of consumption, production and trade flows across regions, under a variety of supply and demand, trade and domestic policy scenarios and over an at least annual time period. The method employs a multi-component spatial equilibrium function approximating an inter-regional market in agricultural commodities, such as dairy commodities, and enables the setting of trade and domestic policy instruments to enable forecasting under a variety of forecast scenarios. The function further enables the incorporation of intermediate commodities, in addition to primary and processed commodities, to account for the effects of reconstitution technologies on said forecasted values. The method generally comprises creating an inputs database comprising a definition of the regions and forecast scenarios, and a plurality of dairy sector data spanning a number of recent years including commodity prices and amounts of consumption, production and trade flow in the regions; refining the function; solving the refined function by maximizing a consumer and a producer surplus net of all transaction costs, to generate the forecasts; and, outputting the forecasts to a results database. The method may further solve for an optimal amount of intermediate commodities consumed in the making of the final processed commodities by region under an assumption of optimal use to further refine the forecasts. The system outputs in the forms of graphs, spreadsheets, maps, or other formats can be delivered electronically through various media.