What Explains Agricultural Price Movements?

After 2005, commodity prices experienced their longest and broadest boom since World War II. Agricultural prices have now come down considerably since their 2011 peak, but are still 40 percent higher in real terms than their 2000 lows. This paper briefly addresses the main arguments on the causes of the agricultural price cycle. It broadens the scope of analysis by focusing on six agricultural commodities, and identifies the relative weights of key quantifiable drivers of their prices. It concludes that increases in real income negatively affect real agricultural prices, as predicted by Engel's Law. Energy prices matter most (not surprisingly, given the energy-intensive nature of agriculture), followed by stock-to-use ratios and, to a lesser extent, exchange rate movements. The cost of capital affects prices only marginally, probably because it not only influences demand, but also evokes a supply response.

Bibliographic Details

Main Authors:	Haniotis, Tassos, Baffes, John
Format:	Working Paper biblioteca
Language:	English en_US
Published:	2016-03
Subjects:	FOOD PRICE, MARKET DEVELOPMENTS, MONETARY POLICY, UNCERTAINTIES, PRICE LEVELS, FOREIGN INVESTMENT, PRICE INCREASES, DEVELOPING COUNTRIES, COST OF CAPITAL, STOCK, ENERGY PRICES, INFORMATION SYSTEM, SECURITY CONCERNS, PRICE UNCERTAINTIES, INCOME, INTEREST, PURCHASING‐POWER, COMMODITY PRICE, EMERGING ECONOMIES, INTEREST RATE, EXCHANGE, TREASURIES, PRODUCER PRICES, FOOD PRICES, PRICE INDICES, FISCAL POLICY, EXCHANGE RATE, PRICE, MARKET FAILURE, SUPPLY SCHEDULE, PRICE TREND, ASSET VALUES, TREASURY BILL, SUPPLY SCHEDULES, PRICE VOLATILITY, INFLATION, DEVELOPING COUNTRY, PRICE VARIATION, CENTRAL BANK, MARKET PARTICIPANTS, PUBLIC POLICY, NATURAL GAS PRICES, GLOBAL ECONOMY, AGRICULTURAL COMMODITIES, CURRENCY, DEVELOPMENT ECONOMICS, EXCHANGE RATE MOVEMENTS, RESERVE BANK, INFLATIONARY PRESSURES, PRODUCTS, EXCHANGE RATES, INTEREST RATES, MARKET FAILURES, NATURAL DISASTERS, DEBT, MARKETING, MARKETS, BORROWING COUNTRIES, AGRICULTURAL PRICES, PRODUCT, AGRICULTURAL PRICE, NATURAL RESOURCES, INVENTORY, MARKET PRICE, PRICE INFLATION, EXPENDITURE, COMMODITY‐PRICE, CONSUMPTION, FEDERAL RESERVE, PRICE TRENDS, FEDERAL RESERVE BANK, POLICIES, VOLATILITY, FINANCIAL CRISIS, STANDARD OF LIVING, FUTURE, VALUE, POLICY MAKERS, DEMAND, AGGREGATE DEMAND, NOMINAL INTEREST RATES, PRICE LEVEL, CONSUMER PRICE, PRICE CHANGES, INCOMES, PRICES INDEX, PRICE FLUCTUATIONS, DEMAND GROWTH, CEREAL PRICES, MARKET, POLICY, TREASURY, PRICE MOVEMENTS, INSURANCE, CURRENCIES, COMMODITY PRICES, ECONOMIC DEVELOPMENT, TRADE, NATURAL GAS, SECURITY, STOCKS, INVESTMENT, COAL, SUPPLY, PURCHASING, INSURANCE MECHANISMS, COMMODITY MARKETS, POWER‐PARITY, INVESTMENTS, CONSUMER PRICE INDEX, PRICE INDEX, PRICE OF COAL, TOTAL DEMAND, COMMODITIES, COMMODITY, PRICES, ENERGY PRICE, STORAGE,
Online Access:	http://documents.worldbank.org/curated/en/2016/03/26002712/explains-agricultural-price-movements https://hdl.handle.net/10986/23927
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