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The Economics of Commodity Futures Markets: A Survey

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  • Gray, Roger W.
  • Rutledge, David J.S.

Abstract

This article reviews some of the literature pertaining to futures markets. After briefly considering how the evolution of the institution of futures trading has required changing interpretations, we devote a longer section to the interplay between theory and evidence concerning intertemporal price relationships. While disputed and inconclusive interpretations persist, Working's theory of the price of storage and his revision of hedging doctrine are clear landmarks of progress in understanding these price relationships. We deal separately with hedging theory; then with the relation between futures and price variability; and finally with the stochastic attributes of futures prices.

Suggested Citation

  • Gray, Roger W. & Rutledge, David J.S., 1971. "The Economics of Commodity Futures Markets: A Survey," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(04), pages 1-52, December.
    • Handle: RePEc:ags:remaae:9639
    DOI: 10.22004/ag.econ.9639
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    References listed on IDEAS

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    1. Mark J. Powers, 1967. "Effects of Contract Provisions on the Success of a Futures Contract," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(4), pages 833-843.
    2. Leland L. Johnson, 1960. "The Theory of Hedging and Speculation in Commodity Futures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 27(3), pages 139-151.
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    5. Richard G. Heifner, 1966. "The Gains from Basing Grain Storage Decisions on Cash-Future Spreads," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(5), pages 1490-1495.
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    16. Gruen, Fred H.G., 1960. "The Pros and Cons of Futures Trading for Woolgrowers," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(03), pages 1-12, September.
    17. Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66(3), pages 233-233.
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    19. Roland S. Vaile, 1948. "Inverse Carrying Charges in Futures Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 574-575.
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    Cited by:

    1. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 20, pages 1-10.
    2. repec:zbw:iamodp:340077 is not listed on IDEAS
    3. Watson, Alistair S., 1980. "Wool In 1980," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(2), pages 1-15, August.
    4. Christine Ennew & Wyn Morgan & Tony Rayner, 1992. "Role of attitudes in the decision to use futures markets: The case of the London potato futures market," Agribusiness, John Wiley & Sons, Ltd., vol. 8(6), pages 561-573.
    5. Białkowski, Jędrzej & Bohl, Martin T. & Perera, Devmali, 2023. "Commodity futures hedge ratios: A meta-analysis," Journal of Commodity Markets, Elsevier, vol. 30(C).
    6. Méndez Parra, Maximiliano, 2015. "Futures prices, trade and domestic supply of agricultural commodities," Economics PhD Theses 0115, Department of Economics, University of Sussex Business School.
    7. Bhardwaj, Geetesh & Janardanan, Rajkumar & Rouwenhorst, K. Geert, 2021. "The first commodity futures index of 1933," Journal of Commodity Markets, Elsevier, vol. 23(C).
    8. Steffen Volkenand & Günther Filler & Martin Odening, 2020. "Price Discovery and Market Reflexivity in Agricultural Futures Contracts with Different Maturities," Risks, MDPI, vol. 8(3), pages 1-17, July.
    9. Kemp-Benedict, Eric, 2018. "Dematerialization, Decoupling, and Productivity Change," Ecological Economics, Elsevier, vol. 150(C), pages 204-216.
    10. Tumblin, Alan D. & Hauser, Robert J. & Garcia, Philip, 1986. "Incorporating Basis Expectation into Hedging Effectiveness Measures," 1986 Annual Meeting, July 27-30, Reno, Nevada 278171, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013. "The Fundamentals of Commodity Futures Returns," Review of Finance, European Finance Association, vol. 17(1), pages 35-105.
    12. Jędrzej Białkowski & Martin T. Bohl & Devmali Perera, 2022. "Commodity Futures Hedge Ratios: A Meta-Analysis," Working Papers in Economics 22/12, University of Canterbury, Department of Economics and Finance.
    13. Sooy, Jeff & Branch, Ben, 1980. "A Study Of The Economic Functions Of The Maine Potato Futures Market," Journal of the Northeastern Agricultural Economics Council, Northeastern Agricultural and Resource Economics Association, vol. 9(1), pages 1-11, April.
    14. Sooy, Jeff & Branch, Ben, 1980. "A Study Of The Economic Functions Of The Maine Potato Futures Market," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 0(Number 1), pages 1-11, April.
    15. Prehn, Soren, 2024. "Why hedging, as practiced for storable commodities, is not an option for dairy farmers: a critical discussion," IAMO Discussion Papers 340077, Institute of Agricultural Development in Transition Economies (IAMO).
    16. Runge, C. Ford, 2006. "Agricultural Economics: A Brief Intellectual History," Staff Papers 13649, University of Minnesota, Department of Applied Economics.
    17. Liu, Hsiang-Hsi, 1983. "An annual simultaneous equation econometric model of U.S. corn and soybean cash and futures markets," ISU General Staff Papers 198301010800009935, Iowa State University, Department of Economics.
    18. Kenyon, David E. & Kingsley, Steven E., 1973. "An Analysis Of Anticipatory Short Hedging Using Predicted Harvest Basis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(1), pages 1-5, July.
    19. Mendez Parra, Maximiliano, 2015. "Seasonal Unit Roots and Structural Breaks in agricultural time series: Monthly exports and domestic supply in Argentina," MPRA Paper 63831, University Library of Munich, Germany, revised 06 Apr 2015.
    20. Schnake, Kristin N. & Karali, Berna & Dorfman, Jeffrey H., 2012. "The Informational Content of Distant-Delivery Futures Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), pages 1-15, August.
    21. Vollink, William James, 1977. "An analysis of basis value determination for live beef cattle," ISU General Staff Papers 1977010108000018132, Iowa State University, Department of Economics.
    22. Langley, James A., 1983. "Regional acreage response functions for major US field crops: estimation and policy implications," ISU General Staff Papers 198301010800008678, Iowa State University, Department of Economics.
    23. C. T. Ennew & C. W. Morgan & A. J. Rayner, 1992. "Objective And Subjective Influences On The Decision To Trade On The London Potato Futures Market," Journal of Agricultural Economics, Wiley Blackwell, vol. 43(2), pages 160-174, May.

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