Corn Price Behavior – Volatility transmission during the boom on futures Markets

Since 2000 a number of factors impacted agricultural markets drastically. Among these are structural changes in global demand and repeated supply constraints that supported the observed positive development of agricultural prices. Given the increasingly interdependent global markets, the question arises of in how far an isolated view of a single market, when analysing price volatility, is sufficient? The paper is a contribution to the debate on the recent commodity price bubble and the relationship among commodity futures markets for agricultural raw materials. More particularly, the transmission of price volatility between commodity future markets is analysed. The background question is whether and to what extent the volatility of agricultural commodity prices at different market places have been transferred during the drastic price changes of 2008. In this analysis the volatility of the maize future price at three different commodity futures exchange is modelled as a multivariate GARCH - process. By doing so, interactions between stock markets in different venues are incorporated. The results of the econometric analysis are discussed against the background of the developments in agricultural and biofuel policy.Commodity Futures, Corn, Time Series, Price volatility transmission, multivariate GARCH, Agricultural and Food Policy,

GAPsi simulations updated baseline and EU enlargement under the Mid-Term-Review scenario

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The impact of the mid-term review on the German agricultural sector

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EU-Trade Agreements - What Are They Dealing With?

International Relations/Trade,

Supply Control or Social Control? Coca, Eradication and Development in the Andes

For over two decades the US has funded repressive forced coca eradication in Peru, Colombia and Bolivia to reduce the illegal cocaine trade. These policies have never met their stated goals and have generated violence and poverty. In 2006 Bolivia definitively broke with the US anti-narcotics model, replacing the militarized eradication of coca crops with a community-based coca control strategy. The program substantially reduced the coca crop while providing subsistence and citizenship for farmers and respecting human rights. This article outlines the elements of the Bolivian initiative that ensure its functioning and considers to what extent they can be translated to other contexts. More broadly this paper draws attention to the fundamental inability of supply side control initiatives to slow the illegal drug trade, which is driven by continuing demand and exorbitant profits

Renewable energy - new forces in global ethanol trade?

The paper presents an extended gravity equation application for the global trade with ethanol. The background and different attempts for a theoretical foundation of the standard approach are discussed. The econometric work takes regional integration schemes into account, as well as the influence of the production factor agricultural land and the level of oil prices on the world market. Results indicate that global bilateral trade flows of ethanol can be explained by a set of comprehensive explanatory variables, including regional agreements and the price level of oil. From a global perspective the EU effect on trade flows is trade diverting as the regional agreement reduces the linkage to world markets and increases the intra-regional level of trade with ethanol. The analysis over time however indicates that the decoupling of the EU ethanol market from the world market is decreasing, potentially reflecting demand increases within the EU.gravity equation, bilateral trade flows, trade with renewable energy, biofuels, and econometric estimation, Resource /Energy Economics and Policy,

EU ENLARGEMENT - A NEW DIMENSION

Enlarging the EU presents a tremendous effort with obstacles for old and new member states especially in the agricultural sector. In this paper, impacts of a new accession round were analyzed with the help of the comparative-static general equilibrium model GTAP (Global Trade Analysis Project). The standard version was extended to allow for a better representation of specific instruments of the Common Agriculture Policy and the EU budget. To capture detailed effects in new member states, simulations were carried out for 12 candidate countries, the EU-15 and the rest of the world. As for products the focus lies on agriculture. Scenarios include an enlargement with and without the transfer of direct payments in the new member states, according to the proposal of the EU commission from January 2002. Simulations in a post-Agenda 2000 environment led to heterogeneous country specific impacts in the accession countries whereas the changes within EU-15 and the rest of the world were negligible. Due to adjustments in tariffs, trade balances of the new member states were deteriorating while welfare effects are positive. Transfer of direct payments led to more pronounced effects, especially with regard to output and trade. Without direct payments accession countries would be net contributors to the EU budget. This would change when they become eligible for this subsidy. In general, the analysis shows the importance of a country specific perspective.EU enlargement, Common Agricultural Policy, EU budget, GE-modeling, Political Economy, D58, E62, F15, O52, Q18,

Expansion of Mercosur's Agricultural Exports to the EU: An Empirical Assessment of the Trade Flows

This paper provides new evidence on income and price elasticities of demand for agricultural exports from Mercosur countries to the EU. Econometric models are constructed for eight agricultural commodities - beef, cocoa, coffee, orange juice, poultry, sugar, soya and wheat - exported from Mercosur to the EU. A modelling approach based on the error correction mechanism is used in order to emphasise the importance of the dynamics of trade functions. The results indicate that there is a relatively weak demand response to income and price changes in the EU. However, the results also suggest that relative-price variations affect significantly the demand for Mercosur commodity exports, implying that the exporter's market share is influenced by price competitiveness.agricultural trade, European Union, Mercosur, econometric models, cointegration, International Relations/Trade, C22, Q17,

Preisvolatilität auf landwirtschaftlichen Märkten

Zusammenfassung: In diesem Beitrag wird die Entwicklung der Preisvolatilität auf deutschen Agrarmärkten analysiert. Ziel ist es das Ausmaß der Preisvolatilität auf ausgewählte deutsche Agrarmärkte zu quantifizieren und festzustellen inwiefern sie sich im Zeitablauf verändert hat. Soweit möglich wird eine Vergleichbarkeit zwischen den Entwicklungen auf nationalen und internationalen Produktmärkten hergestellt, bzw. es werden die jeweiligen Entwicklungen zueinander in Bezug gestellt. In diesem Zusammenhang gestellte Fragen sind: – Hat es eine Erhöhung der Preisvolatilität gegeben? – Stammt diese aus den Weltmärkten? – Welche Auswirkungen hat die Preisvolatilität auf die Marktakteure? – Welche Rolle spielen dabei die Instrumente der Agrarpolitik und welche Instrumente stehen zur Verfügung, um die nachteiligen Folgen der Volatilität für die Landwirtschaft zu begrenzen? Die Ergebnisse der Analyse zeigen, dass die Preisvolatilitäten auf den untersuchten deutschen Agrarmärkten in den letzten 40 Jahren gestiegen sind. Dies steht im Gegensatz zur Entwicklung der Volatilitäten auf den Weltmärkten. Diese Entwicklung ist dennoch nachvollziehbar, da Deutschland, als Mitglied der EU in den letzten Jahren an dem anhaltenden Reformprozess der GAP teilgenommen hat, deren letztliches Ziel es ist, die Märkte der EU dem Weltmarkt zu öffnen. Der Rückzug der Politik im Rahmen der Reformen der GAP führt in der EU und in Deutschland zu einer Erhöhung des Austausches von Preissignalen zwischen den EU-Binnenmärkte und dem Weltmarkt. Während dieses Prozesses erhöht sich die Preisvolatilität auf den europäischen Märkten. Ein erhöhtes Niveau der Preisvolatilität führt zu erhöhter Marktunsicherheit und hat zur Folge, dass die auf Investitionen beruhenden Innovationsprozesse ausbleiben oder nur zögerlicher umgesetzt werden. Summa summarum zeichnet sich für die deutschen und europäischen Unternehmer des Agrarsektors ein Wandel bezüglich der Risikominimierungsstrategie ab. Die auf staatliche Intervention basierenden Strategien treten in den Hintergrund, während die auf unternehmerische Kompetenz, Geschicklichkeit und Vorsorge basierenden Strategien in den Vordergrund rücken. Vor dem Hintergrund des Pfades der Reformen der Agrarpolitik und der gegenwärtige Debatte um die ‚Finanzialisierung‘ der Agrarmärkte ist es zunehmend Aufgabe der Politik die Funktionsfähigkeit der Märkten (sowohl physische als auch Warenterminmärkte) zu stärken. Wesentliche Beiträge sind in der Erhöhung der Markttransparenz auf den Finanzmärkten und der Gewährleistung von Marktinformation auf den physischen Märkten zu sehen. -------------------------------------------------------------------------- ------------------------------------------------------------- Summary: In this paper, the development of price volatility on German agricultural markets is analyzed. The goal is to quantify the degree of price volatility for selected German agricultural markets and determine how it evolutes over time. Where possible a comparison between the developments in national and international product markets is established. In this context, questions are: In this context, questions are: – Was there an increase in price volatility? – Did it come from the world markets? – What is the impact of price volatility on the market players? – What role do the instruments of agricultural policy play and what tools are available to limit the adverse consequences of volatility for agriculture? The results of the analysis shows that price volatility on the investigated German agricultural markets increased along the last 40 years. This stays in contrast to the trend of volatility in world markets. This development is still reasonable, since Germany has participated as a member of the EU in the reform process of the CAP, whose ultimate goal is to open the markets of the EU the world market. The withdrawal of the policy during the reforms of the CAP in the EU and in Germany to increase the exchange of price signals between the EU's internal markets and the global market. During this process, the in­creased price volatility in European markets. An increased level of price volatility leads to increased market uncertainty and has the effect that the investment-based innovation processes is interrupted or occurs only haltingly. All in all the German and European operators in the agricultural sector are amid a change in relation to risk minimization strategies. The strategies based on state intervention turn into the background, while those based on entrepreneurship, skill-based, and prevention oriented come to the fore. Against the background of the path of reform of agricultural policy and the current debate on the 'financialisation' of agricultural markets, it is increasingly a mission of the policy, to assure the functioning and strength of markets (both physical and futures market). Major contributions are seen in measures that increase transparency in financial markets and that guarantee broad market information on the physical markets.Volatilität, deutsche Agrarmärkte, Agrarpolitik, volatility, German agricultural markets, agricultural policy, Agricultural and Food Policy, Demand and Price Analysis, Q11, Q13, Q18,