A Speculative Bubble in Commodity Futures Prices? Cross-Sectional Evidence

Recent accusations against speculators in general and long-only commodity index funds in particular, include: increasing market volatility, distorting historical price relationships, and fueling a rapid increase and decrease in commodity inflation. Some researchers have argued that these market participants—through their impact on market prices—may inadvertently prevented the efficient distribution of food aid to deserving groups. Certainly, this result—if substantiated— would counter the classical argument that speculators make prices more efficient and thus improve the economic efficiency of the agricultural and food marketing system. Given the very important policy implications, it is crucial to develop a more thorough understanding of long-only index funds and their potential market impact. Here, we review the criticisms (and rebuttals) levied against (and for) commodity index funds in recent U.S. Congressional testimonies. Then, additional empirical evidence is added regarding cross-sectional market returns and the relative levels of long-only index fund participation in 12 commodity futures markets. The results suggest that index fund positions across futures markets have no impact on relative price changes across those markets. The empirical results provide no evidence that long-only index funds impact commodity futures prices.Commitment’s of Traders, index funds, commodity futures markets, Agribusiness, Agricultural Finance, Farm Management, Financial Economics, Research Methods/ Statistical Methods, Risk and Uncertainty,

The Adequacy of Speculation in Agricultural Futures Markets:Too Much of a Good Thing?

Long-only commodity index funds have been blamed by other futures market participants for inflating commodity prices, increasing market volatility, and distorting historical price relationships. Much of this criticism is leveled without any formal empirical support or even cursory data analyses. The Commodity Futures Trading Commission makes available the positions held by index funds and other large traders in their Commitment’s of Traders report. In this research, we make an initial assessment of the size and activity of index funds in traditional agricultural futures markets. The results suggest that after an initial surge from early 2004 through mid-2005, index fund positions have stabilized as a percent of total open interest. Speculative measures—such as Working’s T—suggest that long-only funds may provide a benefit in markets traditionally dominated by short hedging.Commitment’s of Traders, index funds, commodity futures markets, Agricultural Finance,

The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?

The objective of this report is to re-visit the “adequacy of speculation” debate in agricultural futures markets. The Commodity Futures Trading Commission makes available the positions held by index funds and other large traders in their Commitment of Traders reports. The results suggest that after an initial surge from early 2004 through mid-2005, index fund positions have stabilized as a percent of total open interest. Traditional speculative measures do not show any material changes or shifts over the sample period. In most markets, the increase in long speculative positions was equaled or surpassed by an increase in short hedging. So, even after adjusting speculative indices for index fund positions, values are within the historical ranges reported in prior research. One implication is that long-only index funds may be beneficial in markets traditionally dominated by short hedging. Attempts to curb speculation through regulatory means should be weighed carefully against the potential benefits provided by this class of speculators.Commitment’s of Traders, index funds, commodity futures markets, Agricultural Finance, Financial Economics,

Smart Money? The Forecasting Ability of CFTC Large Traders

The forecasting ability of the Commodity Futures Trading Commission’s Commitment’s of Traders data set is investigated. Bivariate Granger causality tests show very little evidence that traders’ positions are useful in forecasting (leading) market returns. However, there is substantial evidence that traders respond to price changes. In particular, non-commercial traders display a tendency for trend-following. The other trader classifications display mixed styles, perhaps indicating that those trader categories capture a variety of traders. The results generally do not support the use of the Commitment’s of Traders data in predicting market movements.Commitment’s of Traders, futures markets, forecasting, Agricultural Finance, Financial Economics,

Smart Money: The Forecasting Ability of CFTC Large Traders in Agricultural Futures Markets

The forecasting content of the Commodity Futures Trading Commission’s Commitments of Traders (COT) report is investigated. Bivariate Granger causality tests show very little evidence that traders’ positions are useful in forecasting (leading) returns in 10 agricultural futures markets. However, there is substantial evidence that traders respond to price changes. In particular, noncommercial traders display a tendency for trend following. The other trader classifications display mixed styles, perhaps indicating those trader categories capture a variety of traders. The results generally do not support use of the COT data in predicting price movements in agricultural futures markets.agricultural futures markets, commitments of traders, forecasting, prices, Agribusiness, Agricultural Finance,

Stress analysis of buried pipes

Pipeline plays a vital role in transporting water, gas and oil from one place to another. Over the years, several failures have been reported in pipeline mainly due to aging (i.e., corrosion). The failure occurs when the stresses in a pipe segment due to applied loads exceed the capacity of the pipe. Therefore, it is important to predict the realistic pipe stress at the design and assessment stages to ensure the safety across the entire lifetime. As significant portion of the pipeline is buried in the underground in most of the occasions, the soil-structure interaction analysis is important as part of the stress analysis. Depending on the location of the network, the pipe will be subjected to varying levels of traffic and pressure loads that need to be accurately determined in order to perform reliable pipe stress estimations. Several pipe stress prediction methods have been developed over the years and reported in the literature. However, these methods are either analytical or empirical based models. The former uses the structural mechanics of the pipe by discarding the complex soil-structure interaction effect while the later fully depends on the experimental results. To overcome these problems, the numerical methods can be used to incorporate the soil-structure interaction effect more efficiently in pipe stress analysis together with traffic and internal pressure loads. In this study, the finite element method is used to analyse the pipe-soil system subjected to external traffic and internal pressure loads. Further, the model developed is used to understand the effect of soil properties, pipeline characteristics, and loading on pipe stress through sensitivity analysis. Finally, the response surface method is used to develop a new pipe stress predictive equation using the results of finite element analyses

Investigation of rising nitrate concentrations in groundwater in the Eden Valley, Cumbria. 3, saturated zone studies

This component Work Package of the Eden Valley Project was undertaken with the objective of determining the hydrogeological regime and hydrochemical stratification in selected boreholes. The subsequent aim is to apply this to better understand timescales for water movement through the saturated zone along a transect ending near to the River Eden where the Permo-Triassic sandstone aquifer is exposed or underlies thin superficial deposits. A previous report in this series confirmed rising nitrate trends in groundwater in the study area, and suggested that with continued land use practices and with no evidence of denitrification, that this trend would continue. Another concluded that the average recharge rate is probably in the range 425-470 mm/y and the rate of water movement through the unsaturated zone is c. 3.5-3.85 m/y. Based on this estimate of water movement in the unsaturated zone, the travel time for recharge to migrate from the soil to the water table (or the delay imposed by the unsaturated zone) over most of the area where the sandstone is free of superficial deposits in the Eden Valley is c. 14 years. However if the higher fells are not considered - closer to 10 years. Given the inherent uncertainties and limitations associated with the various methods for determining the hydrogeological regime in a boreholem, methods proposed were: (i) to date the pore water profile within the saturated zone using CFC and SF6 tracers (ii) to determine the variation of aquifer properties with depth, for the matrix (using laboratory techniques) and the aquifer (using field pumping techniques). (iii) To use groundwater models to estimate groundwater travel times in the saturated zones (this part of the project has not yet been funded). A transect approach was adopted using existing boreholes to the east of Penrith to the Eden floodplain and addressing gaps with infill drilling. Despite early promise other boreholes (on a ‘southern’ transect) were discounted due to inaccessibility or unsuitable construction. A c. 4km transect from the east of Penrith in a north-western direction to the floodplain of the River Eden was selected starting at previously drilled project borehole

Advisory Service Marketing Profiles for Soybeans over 2002-2004

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 2002, 2003 and 2004 soybean crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program’s set of recommendations throughout the crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer’s position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer’s position. On the other hand, when the amount priced is 0%, the value of the farmer’s position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service’s set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Agricultural Finance,

Advisory Service Marketing Profiles for Corn over 2002-2004

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 2002, 2003 and 2004 corn crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program’s set of recommendations throughout the crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer’s position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer’s position. On the other hand, when the amount priced is 0%, the value of the farmer’s position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service’s set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Agricultural Finance,