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The Role of Transportation Costs in the Economics of Commodity Markets

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  • Bertrand M. Roehner

Abstract

Transportation costs still play an important role in the economics of commodity markets. In this paper I present a theoretical framework aimed at describing spatial arbitrage under uncertainty; I analyze the effect of changing transport costs on different, yet related, variables: volume of trade, volatility of prices, and levels of spatial price differentials. As a tribute to Enke and Samuelson the model is referred to as the stochastic Enke-Samuelson model. It provides predictions for variables (such as price volatilities or correlations) which cannot be defined in the deterministic framework of the standard spatial price equilibrium model. The statistical tests display a convergent array of evidence in favor of the model. Copyright 1996, Oxford University Press.

Suggested Citation

  • Bertrand M. Roehner, 1996. "The Role of Transportation Costs in the Economics of Commodity Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 339-353.
    • Handle: RePEc:oup:ajagec:v:78:y:1996:i:2:p:339-353
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    File URL: http://hdl.handle.net/10.2307/1243707
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    Cited by:

    1. Lautier, Delphine & Raynaud, Franck, 2011. "Statistical properties of derivatives: A journey in term structures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(11), pages 2009-2019.
    2. Ward, William A. & Bhattarai, Madhusudan & Huang, Pei, 1999. "The New Economics Of Distance: Long-Term Trends In Indexes Of Spatial Friction," Working Papers 18808, Clemson University, Department of Agricultural and Applied Economics.
    3. Michael S. Haigh & Nikos K. Nomikos & David A. Bessler, 2004. "Integration and Causality in International Freight Markets: Modeling with Error Correction and Directed Acyclic Graphs," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 145-162, July.
    4. Haigh, Michael S. & Bryant, Henry L., 2001. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, Blackwell, vol. 25(1), pages 41-58, June.
    5. Vangelis Tsioumas & Stratos Papadimitriou, 2018. "The dynamic relationship between freight markets and commodity prices revealed," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(2), pages 267-279, June.
    6. Nathaniel Dede-Bamfo & T. Edwin Chow & Chikodinaka Vanessa Ekeanyanwu, 2023. "Local Perspectives on Spatial Accessibility to Market in the Afram Plains, Ghana," International Journal of Applied Geospatial Research (IJAGR), IGI Global, vol. 14(1), pages 1-24, January.
    7. Cerasa, Andrea & Buscaglia, Daniela, 2019. "A hedonic model of import steel prices: Is the EU market integrated?," Resources Policy, Elsevier, vol. 61(C), pages 241-249.
    8. Haigh, Michael S. & Bryant, Henry L., 2000. "Price And Price Risk Dynamics In Barge And Ocean Freight Markets And The Effects On Commodity Trading," 2000 Conference, April 17-18 2000, Chicago, Illinois 18934, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    9. repec:dau:papers:123456789/5528 is not listed on IDEAS
    10. Walter C. Labys, 2003. "New Directions in the Modeling and Forecasting of Commodity Markets," Mondes en développement, De Boeck Université, vol. 122(2), pages 3-19.
    11. Walter Labys, 2005. "Commodity Price Fluctuations: A Century of Analysis," Working Papers Working Paper 2005-01, Regional Research Institute, West Virginia University.
    12. Bertrand M. Roehner, 2010. "Fifteen years of econophysics: worries, hopes and prospects," Papers 1004.3229, arXiv.org.
    13. Schwab, Olaf & Bull, Gary & Maness, Thomas, 2005. "A mill-specific roundwood demand equation for southern and central Finland," Journal of Forest Economics, Elsevier, vol. 11(2), pages 95-106, September.
    14. repec:rri:wpaper:200501 is not listed on IDEAS
    15. Michael S. Haigh & Henry L. Bryant, 2000. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, International Association of Agricultural Economists, vol. 25(1), pages 41-58, June.
    16. Liu, Yun & Zhang, Yun & Zhang, Yifei & Xiao, He, 2022. "Small business owners’ Fintech credit in crises: Theory and evidence from farmers under the COVID-19," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    17. Konkoly, Attila, 1996. "Development of a price visualization procedure of cash grain markets using GIS," ISU General Staff Papers 1996010108000017634, Iowa State University, Department of Economics.

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