IDEAS home Printed from https://ideas.repec.org/p/ags/gewi15/209198.html
   My bibliography  Save this paper

Demand Driven Markets and the Importance of Demand Rationing

Author

Listed:
  • Prehn, Sören
  • Glauben, Thomas
  • Loy, Jens-Peter

Abstract

Whenever supply falls short or actual consumption rates exceed projected consumption rates grain markets call for demand rationing. In recent years, in particular high demand made demand rationing more than once necessary. Here, we develop a theory of how demand rationing functions. Theory implies that agricultural futures markets not only fulfill a hedging and information function but also a market coordination function. Speculators always have a rational economic incentive to bring demand down to fit with supply conditions. Empirical evidence for the US corn market emphasizes the importance of demand rationing for the functioning of grain markets.

Suggested Citation

  • Prehn, Sören & Glauben, Thomas & Loy, Jens-Peter, 2015. "Demand Driven Markets and the Importance of Demand Rationing," 55th Annual Conference, Giessen, Germany, September 23-25, 2015 209198, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi15:209198
    DOI: 10.22004/ag.econ.209198
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/209198/files/B1-109-Prehn-Demand_Driven_Markets_and_the_Importance_of_Demand_Rationing.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.209198?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeremy Ferwerda & Jens Hainmueller & Chad Hazlett, 2013. "KRLS: Stata module to perform Kernel–Based Regularized Least Squares," Statistical Software Components S457704, Boston College Department of Economics, revised 06 Mar 2015.
    2. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    3. Good , Darrel & Irwin, Scott, 2011. "Corn Prices, Basis, and Spreads," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 1, October.
    4. Hainmueller, Jens & Hazlett, Chad, 2014. "Kernel Regularized Least Squares: Reducing Misspecification Bias with a Flexible and Interpretable Machine Learning Approach," Political Analysis, Cambridge University Press, vol. 22(2), pages 143-168, April.
    5. Good, Darrel, 2012. "Corn Prices in Three Parts," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2, May.
    6. Good, Darrel, 2012. "Has the 2011 Corn Crop Been Rationed?," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2, April.
    7. Good, Darrel & Irwin, Scott, 2012. "Corn Basis Revisited," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Etienne, Xiaoli L., 2015. "Financialization of Agricultural Commodity Markets: Do Financial Data Help to Forecast Agricultural Prices?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205124, Agricultural and Applied Economics Association.
    2. Héctor M. Núñez & Andrés Trujillo-Barrera, 2015. "Impact of U.S. Biofuel Policy in the Presence of Drastic Climate Conditions," Working Papers DTE 585, CIDE, División de Economía.
    3. Nicolas Legrand, 2023. "War in Ukraine: The rational “wait‐and‐see” mode of global food markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 626-644, June.
    4. Chen, Yichun & Subhan, Mohammad & Ahmad, Gayas & Adil, Mohd & Zamir, M.N., 2024. "Unveiling the linkages among digital technology, economic growth, and carbon emissions: A resource management perspective," Resources Policy, Elsevier, vol. 91(C).
    5. Aleberto Alesina & Guido Tabellini & Francesco Trebbi, 2017. "Is Europe an Optimal Political Area?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 169-234.
    6. Thibault Fally & James Sayre, 2018. "Commodity Trade Matters," 2018 Meeting Papers 172, Society for Economic Dynamics.
    7. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2022. "Futures–spot price transmission in EU corn markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 679-709, July.
    8. Joachim Wagner, 2024. "Estimation of empirical models for margins of exports with unknown non-linear functional forms: A Kernel-Regularized Least Squares (KRLS) approach Evidence from eight European countries," Working Paper Series in Economics 424, University of Lüneburg, Institute of Economics.
    9. Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    10. Bentivoglio, Deborah & Finco, Adele & Bacchi, Mirian, 2015. "Examining Price Transmission between Fuels and Food Prices: the Brazilian Sugar-Ethanol Market," 2015 Conference, August 9-14, 2015, Milan, Italy 211327, International Association of Agricultural Economists.
    11. Gao, Yixuan & Malone, Trey & Schaefer, K. Aleks & Myers, Robert J., 2023. "Disentangling Short-Run COVID-19 Price Impact Pathways in the US Corn Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(2), May.
    12. Kritika Mathur & Nidhi Kaicker & Raghav Gaiha & Katsushi S. Imai & Ganesh Thapa, 2014. "Financialisation of food commodity markets, price surge and volatility: new evidence," Chapters, in: Raghbendra Jha & Raghav Gaiha & Anil B. Deolalikar (ed.), Handbook on Food, chapter 7, pages 149-176, Edward Elgar Publishing.
    13. Ubilava, David, 2017. "The ENSO Effect and Asymmetries in Wheat Price Dynamics," World Development, Elsevier, vol. 96(C), pages 490-502.
    14. Joachim Wagner, 2024. "Digitalization Intensity and Extensive Margins of Exports in Manufacturing Firms from 27 EU Countries - Evidence from Kernel-Regularized Least Squares Regression," Working Paper Series in Economics 428, University of Lüneburg, Institute of Economics.
    15. Sisira Jayasuriya & Purushottam Mudbhary & Sumiter Broca, 2013. "Food Security in Asia: Recent Experiences, Issues and Challenges," Economic Papers, The Economic Society of Australia, vol. 32(3), pages 275-288, September.
    16. Eldor, Liat & Hodor, Michal & Cappelli, Peter, 2023. "The limits of psychological safety: Nonlinear relationships with performance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 177(C).
    17. Roy, Arup, 2023. "Nexus between economic growth, external debt, oil price, and remittances in India: New insight from novel DARDL simulations," Resources Policy, Elsevier, vol. 83(C).
    18. Xiaohua Sun & Danish Khan & Yubai Zheng, 2024. "Articulating the Role of Technological Innovation and Policy Uncertainty in Energy Efficiency: an Empirical Investigation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14597-14616, September.
    19. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Yoon, Seong-Min, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 225-243.
    20. Jean-Christophe Bureau & Sébastien Jean, 2013. "Trade liberalization in the bio-economy: coping with a new landscape," Agricultural Economics, International Association of Agricultural Economists, vol. 44(s1), pages 173-182, November.

    More about this item

    Keywords

    Agricultural Finance; Demand and Price Analysis; Risk and Uncertainty;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:gewi15:209198. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gewisea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.