Commodity Price Volatility under New Market Orientations

Recent national and international regulatory reforms (e.g. U.S. FAIR and other GATT compliance reforms) in agricultural markets has led some observers to wonder whether the private sector is able to produce a level of price volatility that is socially acceptable. In this paper, we examine the post reform track record of price volatility and its transmission across vertically linked and geographically linked markets. Livestock, grain, and dairy market data (monthly) are considered across the U.S. and E.C. The standard commodity-pricing model supports the hypothesis that competitive storage acts to reduce the volatility of cash prices. Further, speculative attacks and stock outs have been shown to induce increased volatility. This motivates a scope of consideration that includes prices as well as stock levels to assess their contribution to price volatility. The paper considers evidence based on three decades of monthly data and advanced time series techniques. First, univariate volatility estimates based on the autoregressive conditional heteroskedasticity (GARCH) model are evaluated and compared to historical temporal variation to highlight the importance of well grounded estimation of volatility. Next, the relationships between stocks and the conditional mean, as well as the conditional and unconditional variances of the price series, are assessed for dairy and grain products. Finally, reform associated changes in the structure of the transmission of volatility through vertical markets are considered for dairy products and across geographic markets is considered for grains.Price volatility; price risk; inventories; commodity prices;

THE TRANSMISSION OF PRICE VOLATILITY IN THE BEEF MARKETS

This paper reconsiders the implications of efficient markets for transmission of price volatility across markets. Tests of volatility transmission are based on conditional variances. Results are reported for key grain and beef markets. Transmission across cash, futures, and options is considered.Cointegration, GARCH, Market Efficiency, Beef Markets, Demand and Price Analysis, Livestock Production/Industries,

Commodity Price Volatility under New Market Orientations

Recent national and international regulatory reforms (e.g. U.S. FAIR and other GATT compliance reforms) in agricultural markets has led some observers to wonder whether the private sector is able to produce a level of price volatility that is socially acceptable. In this paper, we examine the post reform track record of price volatility and its transmission across vertically linked and geographically linked markets. Livestock, grain, and dairy market data (monthly) are considered across the U.S. and E.C. The standard commodity-pricing model supports the hypothesis that competitive storage acts to reduce the volatility of cash prices. Further, speculative attacks and stock outs have been shown to induce increased volatility. This motivates a scope of consideration that includes prices as well as stock levels to assess their contribution to price volatility. The paper considers evidence based on three decades of monthly data and advanced time series techniques. First, univariate volatility estimates based on the autoregressive conditional heteroskedasticity (GARCH) model are evaluated and compared to historical temporal variation to highlight the importance of well grounded estimation of volatility. Next, the relationships between stocks and the conditional mean, as well as the conditional and unconditional variances of the price series, are assessed for dairy and grain products. Finally, reform associated changes in the structure of the transmission of volatility through vertical markets are considered for dairy products and across geographic markets is considered for grains

Beyond the Berger Inquiry: Can extractive resource development help the sustainability of Canada’s arctic communities?

The four decades since the Berger Inquiry have produced a large body of research demonstrating the positive and negative impacts of resource development on northern communities. However, little independent research has aimed to yield an understanding of how best to manage the impacts of resource development and to harness its benefits in ways that can promote long-term sustainable development. This question was the impetus for the Resources and Sustainable Development in the Arctic (ReSDA) research project funded by the Social Sciences and Humanities Research Council of Canada in 2011. Representing a network of researchers, community members and organizations, ReSDA researchers conducted a series of analyses that focused on what was needed to ensure that northern communities received more benefits from resource development and potential negative impacts were mitigated. Overall, the analyses highlight the serious gaps that remain in our ability to ensure that resource development projects improve the sustainability of Arctic communities. These gaps include a proper understanding of cumulative impacts, the ability of communities to adequately participate in new regulatory processes, the non-economic aspects of well-being, the effects of impact and benefit agreements and new financial benefits, and new mitigation activities

PRICE VOLATILITY IN THE U.S. DAIRY SECTOR: DUE TO WEEK-OF-MONTHS EFFECTS?

Under recent dairy policy reforms, farm-level milk prices are determined by a multiple component pricing scheme that derives monthly dairy product class prices from weekly NASS survey prices for only the first two weeks of each month. This pricing rule may provide incentives for strategic behavior by dairy sector participants that could induce dairy product price volatility. This paper employs a series of nonparametric approaches to examine evidence of such price manipulation in CME weekly average dairy product prices. Empirical evidence suggests that no such week-of-month effects exist in levels of prices, and only very weak evidence of week-of-month effects in price volatility was found. Together, results suggest dairy product markets are competitively arbitraged rendering price manipulation infeasible. From these results, no evidence suggests that price manipulation might lie behind recent changes in price volatility observed in dairy markets

THE TRANSMISSION OF PRICE VOLATILITY IN THE BEEF MARKETS

This paper reconsiders the implications of efficient markets for transmission of price volatility across markets. Tests of volatility transmission are based on conditional variances. Results are reported for key grain and beef markets. Transmission across cash, futures, and options is considered

PRICE VOLATILITY IN THE U.S. DAIRY SECTOR: DUE TO WEEK-OF-MONTHS EFFECTS?

Under recent dairy policy reforms, farm-level milk prices are determined by a multiple component pricing scheme that derives monthly dairy product class prices from weekly NASS survey prices for only the first two weeks of each month. This pricing rule may provide incentives for strategic behavior by dairy sector participants that could induce dairy product price volatility. This paper employs a series of nonparametric approaches to examine evidence of such price manipulation in CME weekly average dairy product prices. Empirical evidence suggests that no such week-of-month effects exist in levels of prices, and only very weak evidence of week-of-month effects in price volatility was found. Together, results suggest dairy product markets are competitively arbitraged rendering price manipulation infeasible. From these results, no evidence suggests that price manipulation might lie behind recent changes in price volatility observed in dairy markets.Marketing,