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Speculation in the agricultural commodity market

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  • Czech, Katarzyna

Abstract

This paper studies the role of speculators in explaining agricultural commodity price movements. The spikes in global agricultural commodity prices in 2007-2008 and 2010 2011 have opened a debate on the contribution of speculation to recent food price volatility. Most academic literature does not support the idea that speculators drive commodity prices beyond fundamental levels. There are, however, some researchers who do find empirical evidence supporting the idea that the activity of speculators affects commodity prices. This paper concludes that the activity of speculators may temporarily overprice or underprice commodity values. It is assumed, however, that both fundamental and financial factors influence commodity prices. Nevertheless, it is difficult to indicate the extent to which each factor separately affects prices.

Suggested Citation

  • Czech, Katarzyna, 2013. "Speculation in the agricultural commodity market," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 13(28), pages 1-8, December.
    • Handle: RePEc:ags:polpwa:190771
    DOI: 10.22004/ag.econ.190771
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    References listed on IDEAS

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    1. Irwin, Scott H. & Sanders, Dwight R., 2012. "Financialization and Structural Change in Commodity Futures Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(3), pages 371-396, August.
    2. Daniele Girardi, 2012. "Do financial investors affect the price of wheat?," PSL Quarterly Review, Economia civile, vol. 65(260), pages 79-109.
    3. Irwin, Scott H. & Sanders, Dwight R. & Merrin, Robert P., 2009. "Devil or Angel? The Role of Speculation in the Recent Commodity Price Boom (and Bust)," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(2), pages 377-391, August.
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    5. Dietrich Domanski & Alexandra Heath, 2007. "Financial investors and commodity markets," BIS Quarterly Review, Bank for International Settlements, March.
    6. Zawojska, Aldona, 2011. "Czy spekulacje finansowe wpływają na międzynarodowe ceny towarów rolno-żywnościowych?," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 11(26), pages 1-16, March.
    7. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    8. Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.
    9. Working, Holbrook, 1960. "Speculation on Hedging Markets," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 1(2), pages 1-36.
    10. Baffes, John & Haniotis, Tassos, 2010. "Placing the 2006/08 commodity price boom into perspective," Policy Research Working Paper Series 5371, The World Bank.
    11. Helyette Geman, 2005. "Commodities and Commodity Derivatives. Modeling and Pricing for Agriculturals, Metals and Energy," Post-Print halshs-00144182, HAL.
    12. Petzel, Todd E., 1981. "A New Look at Some Old Evidence: The Wheat Market Scandal of 1925," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 18(01), pages 1-12.
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    14. repec:dau:papers:123456789/607 is not listed on IDEAS
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    Cited by:

    1. Czech, Katarzyna, 2016. "Structural Changes in Wheat Market," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 16(31), pages 1-7, December.

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