Showing papers on "Commodity market published in 2007"

Commodity price cycles and heterogeneous speculators: a STAR-GARCH model

Abstract: We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR–GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types.

Commodity Derivatives Market in India

Abstract: The modern commodity market finds its origin in the trading of agricultural products. This article traces the evolution and development of the commodity derivatives market in India. The article then goes on to outline its infrastructure and how it is regulated.

A comparative analysis of single-unit vickrey auctions and commodity markets for realizing grid economies with dynamic pricing

Abstract: The introduction of market principles is a promising approach for dealing with the complex issues that arise in Grid resource management. A key aim is to align the resource consumption and provisioning patterns of Grid participants through proper incentive mechanisms. An important research question in this regard is the choice of a market organization. A number of such organizations have been proposed to support an economically inspired form of Grid resource management. This paper presents a comparative, quantitative, analysis of the single-unit Vickrey auctions and commodity market organizations with regards to price stability, fairness, and communicative and computational requirements. Our analysis based on simulated market scenarios shows that both market organizations lead to similar outcomes but that a commodity market organization leads to more stable market behavior at the cost of higher communicative requirements.

The European Union & the Commodity Debate: From Trade to Aid

Abstract: This article departs from the renewed interest in commodity market regulation and assesses the position of the European Union (EU) on supply-management in tropical commodities. After sketching the resurgence of the commodity debate on the international trade front, the second section recapitulates the thesis that Europe's trade relations shifted from innovative and interventionist arrangements in the 1970s, to a neo-liberal outlook by the end of the 1990s. Based on this historical account, we examine whether the EU's role has changed during the commodity debate since 2003-2004. The analysis makes clear that, although EU policy-makers and institutions have addressed the issue, supply-management schemes are not considered. Without challenging the mainstream approach to commodity trade, Europe's initiatives with regard to 1) export stabilisation, 2) commodity protocols and 3) market access rather show an evolution ‘from trade to aid’. The article concludes with a number of explanations for this recent shift.

Butter Mountains, Milk Lakes and Optimal Price Limiters

Abstract: It is known that simple price limiters may have unexpected consequences in irregular commodity price fluctuations between bull and bear markets and complicated impacts on the size of buffer stocks. In particular, imposing a lower price boundary may lead to a huge buffer stock, e.g. to a ‘butter mountain’ or a ‘milk lake’ and this is a real problem for regulators since storage costs may become impossible to finance over time. The relation between price limiters and the size of buffer stocks is nontrivial and there may exist some optimal price limiters which require only weak market interventions and thus provide a rather inexpensive option to regulate commodity markets. In this article, we use a simple commodity market model to explore the relation between price limiters and the average growth rate of the buffer stocks. It is found that these optimal price limiter levels are simply the minimum values of unstable periodic orbits of the underlying deterministic system.

Pricing commodities, or how to sell when buyers have restricted valuations

Abstract: How should a seller price his goods in a market where each buyer prefers a single good among his desired goods, and will buy the cheapest such good, as long as it is within his budget? We provide efficient algorithms that compute near-optimal prices for this problem, focusing on a commodity market, where the range of buyer budgets is small. We also show that our technique (which is based on LP-rounding) easily extends to a different scenario, in which the buyers want to buy all the desired goods, as long as they are within budget.

Procurement and Distribution Policies in a Distributive Supply Chain in the Presence of Commodity Markets

Abstract: In this research we characterize optimal procurement and distribution policies of a commodity in a multiechelon supply chain. We consider a firm that procures and distributes a commodity from spot and forward markets under random fluctuating prices; the commodity is distributed downstream to a set of nonhomogeneous retailers to satisfy random demand. We model prices with a stochastic process that allows no arbitrage opportunities, and formulate procurement and distribution policies for this system. We explore the value of the commoditys market in providing (a) additional flexibility in procurement, and (b) information on price dynamics generated through the trading of futures contracts. Our results indicate the presence of the commodity market can lead to reductions in controllable costs of the order of 30%; however to obtain these benefits, both the spot procurement flexibility and the term structure of prices generated by the commodity market must be incorporated in the formulation of the operating policy. Managerial insights on the procurement strategy as a function of variability of prices and demand are also discussed.

Brand Agriculture and Economic Geography: A General Equilibrium Analysis

Abstract: This paper presents a general equilibrium model of NEG incorporating the brand agriculture which produces differentiated agricultural products. Focusing on the core-periphery space, we show that highly differentiated brand agriculture can be sustained in the periphery even when the accessibility of the core market is not particulary good. This result gives support for promoting innovation in rural area in order to avoid direct price competition in generic commodity market under unfavorable competitive condition.

Intelligent Agent Technology: An Application to US Wholesale Power Trading

Abstract: Intelligent agents are gaining widespread applications in many trading markets. Although the US wholesale power market comprises a large commodity market, the mechanism of power trading is not clearly investigated. We explore the problem via an intelligent agent-based approach. We create an artificial wholesale market, where many different traders are equipped with learning capabilities. We validate the agent based model with the help of a data set from PJM electricity market. Using the new intelligence system, we investigate the bidding strategies of traders and examine how the price changes occur under different environments.

Market operation system and information processing method

Abstract: PROBLEM TO BE SOLVED: To provide an order board capable of allowing a general consumer, being the seller or buyer of the commercial transaction using a network, to intuitively obtain the market price view of a commodity. SOLUTION: The order board 100 has a commodity name display field 101 and a price axis 102 where order number indexes 110, indicating the number of selling orders and the number of buying orders in each price, are displayed to the right and left of the price axis 102. The prize axis 102 includes display fields 103-109 indicating the respective kinds of market prices. The length of the order number index 110 shows the total amount of orders. The width of the order number index 110 shows the number of orders. An order period is indicated by changing the color, pattern, flicker of the order number index 110. A market operation system is applied to the commodity market utilizing a network represented by the Internet, etc. COPYRIGHT: (C)2008,JPO&INPIT

Global Nutrition Impacts of Rapid Economic Growth in China and India

Abstract: Despite record global economic growth in past decade – malnutrition remains a serious problem in many parts of the world. According to the United Nations’ Food and Agriculture Organization (FAO), about 800 million people (17% of the world’s population) remain malnourished. For these households at a subsistence level of income, changes in commodity market conditions, as may arise from changes in global economic growth and/or trade policy can have serious consequences for nutritional intake. Even a small decline in diet quality can have substantial adverse impacts on health status. On the other hand, a modest income boost, or lower food prices, could have extremely positive impacts. Previously, the links between changes in the global economy and nutritional outcomes have been explored by a relatively wide range of authors (e.g., Fang et al., 2006; Rosegrant et al., 2005). The goal of this paper is to offer modest extensions of this previous work in three directions. First of all, unlike many of the papers in the nutrition area, we seek to account for the behavioral response of low income households in the face of changing prices and incomes. Clearly when households are faced with a rise in the price of food products, they cannot afford to consume as much, ceteris paribus so consumption much adjust. The extent of this adjustment will depend on the change in real income and the Engel elasticities for each good. In addition, consumers are likely to substitute away from higher cost food items. All of these factors could have an advese impact on nutritional attainment. By estimating and incorporating a demand system into our analysis, we are able to take these factors into account. In so doing, we draw on the work of Rimmer and Powell (1996) and Cranfield et al. (2003a; 2003b) in order to characterize consumer demands across the income spectrum.

Bulk Export Commodities: Trends and Challenges

Abstract: This background paper focuses on cotton, coffee, cocoa, tea and tobacco markets and on the marketing of these crops by producers and exporters in low income countries. As will be shown in this paper, the total volumes of these crops that are traded internationally are modest compared to some other agricultural commodities. However, a sizeable number of low income countries are heavily dependent on the export of these commodities for their foreign exchange earnings. Over the past decade or more, international development agencies, including the World Bank, have encouraged the liberalization of markets for these commodities within exporting countries. The paper is divided into four main parts. The first part provides an overview of trends in global commodity markets, with a particular focus on the five crops listed above. The second part considers the organization of value chains for bulk export commodities and whether one can produce a helpful typology of the structure and operations of such chains. This part also briefly addresses the general question of the role of commodity exports in economic development, given the trends described. The third part examines the issue of produce quality within liberalized export commodity systems: how has liberalization affected quality and how can quality be improved within liberalized systems? Finally, the fourth part considers experience with the supply of inputs on credit to smallholder producers in a competitive market setting. The paper concludes with some overall observations about the organization and performance of liberalized export commodity market systems.

A comparative analysis of single-unit vickrey auctions and commodity markets for realizing grid economies with dynamic pricing

Abstract: The introduction of market principles is a promising approach for dealing with the complex issues that arise in Grid resource management. A key aim is to align the resource consumption and provisioning patterns of Grid participants through proper incentive mechanisms. An important research question in this regard is the choice of a market organization. A number of such organizations have been proposed to support an economically inspired form of Grid resource management. This paper presents a comparative, quantitative, analysis of the single-unit Vickrey auctions and commodity market organizations with regards to price stability, fairness, and communicative and computational requirements. Our analysis based on simulated market scenarios shows that both market organizations lead to similar outcomes but that a commodity market organization leads to more stable market behavior at the cost of higher communicative requirements.

First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany

Abstract: This paper applies the literature on asymmetric price transmission to the emerging commodity market for EU emissions allowances (EUA). We utilize an error correction model and an autoregressive distributed lag model to measure the relationship between CO2 price changes and the development of wholesale electricity prices. Using data from the German market for electricity and EUAs, we find that the rising prices of EUAs have a stronger impact on wholesale electricity prices than falling prices -- the first empirical evidence of asymmetric cost passthrough for these new allowances.

Commodity Market Integration: Case of Asian Rice Markets

Abstract: Asia is becoming a global hub for agricultural commodity trade. Rice is an important staple food for most of the Asian population. Most of the international rice trade takes place within Asia. Efficient and integrated rice markets in Asia are essential for improving the volume of rice trade as less than 6% of the global production is traded internationally. The paper tests the extent of cointegration among rice markets by using Johansen test, examines causality by Granger causality test, and also captures the speed of adjustment to deviations from long run equilibrium in rice prices by using vector error correction model. The results reveal that international rice price indices (Thai and US), farm harvest prices and also government support prices are cointegrated in the long run, however the law of one price does not hold good. Thai II (100) Granger causes both Thai-A1 Super and Long Grain No. 2 (4%) US international price indices. There are five cointegrating vectors out of nine countries farm harvest prices. Japan, Thailand, Bangladesh and Philippines farm harvest prices are exogenous and influence other countries prices, and thereby are important sources of price formation in the Asian rice markets. Short run elasticities are quite significant for some countries (between India and Thailand, between Bangladesh and Pakistan). Long run elasticities of adjustment are quite low (only about 6-8% of total deviation in long run equilibrium will be corrected in a year in different countries). In case of government support prices, only four price series are integrated out of nine series considered. Granger causality results suggest that no single country is completely exogenous, and many countries GSPs are interlinked to some extent. Here also the short run elasticities are significant for many countries GSPs (ranging from 0.21 between India and Korea to 0.84 between Thailand and India). Long run elasticities (error correction terms) are quite low and insignificant. Overall, the paper concludes that Thailand, Bangladesh, Philippines and Japan are important sources of price formation in Asian market.

股票政策宣告對農產品價格與股票價格的動態影響 [The impact of stock market policy announcement on commodity prices and share prices]

Abstract: It has been an important issue to analyze the possible impact of macroeconomic effects, such as: exchange rate or interest rate, on the commodity prices since 1970s because of the tremendous volatility of commodity prices on the US. Thereafter, there are a lot of literature in agricultural economics relative to the empirical study. But the results of these literature are ambiguous. On the other hand, Blandchard (1981) incorporated the stock market into the traditional IS-LM model and discussed the interaction between stock market and economy. The financial sector plays an important role to affect the time path of commodity prices it cannot be ignored since agricultural industry is just one of sector among the whole economy. The main purpose of this article is to add the stock market into the two-goods economy. One is commodity product and the other is nonagricultural product. According the model including commodity market, nonagricultural product market, monetary market and stock market and under the assumptions of perfect substitutes between stock and bond and perfect foresight expectation, the effect of stock market policies, such as financing interest rate, financing ratio, on dynamics of commodity and share prices will be analyzed. The result shows that in the long run the impact of stock policies on commodity prices depends on the relative magnitudes of price effect of commodity and interest rate effect. While in the short run, whether share price overshooting or not it depends on the length of time between announcement and implement of policies.