Disentangling Corn Price Volatility: The Role of Global Demand, Speculation, and Energy

Abstract

Despite extensive literature on contributing factors to the high commodity prices and volatility in the recent years, few have examined these causal factors together in one analysis. We quantify empirically the relative importance of three factors: global demand, speculation, and energy prices/policy in explaining corn price volatility. A structural vector auto-regression model is developed and variance decomposition is applied to measure the contribution of each factor in explaining corn price variation. We find that speculation is important, but only in the short run. However, in the long run, energy is the most important followed by global demand.

Historic Food Production Shocks: Quantifying the Extremes

“…While food production takes place at very local levels, understanding the impact of a physical food production shock on social systems usually involves modelling the impact on food prices. Changes in food price usually come as a supply-demand response through export markets [28][29][30][31] and, therefore, country level analysis is the most appropriate to study, at least initially.…”

Commodity market risk from 1995 to 2013: an extreme value theory approach

“…Steen and Gjølberg (2013) There is also a growing body of literature that addresses the issue of increasing commodity market volatility. McPhail et al (2012) study corn futures traded on the Chicago Board of Trade and use a structural vector autoregressive model and variance 310 decomposition to analyse corn price volatility. The authors find that second to market © -specific shocks for corn, speculation is the most important factor for explaining corn price variability in the short run.…”

Schadet oder nützt die Finanzspekulation mit Agrarrohstoffen? — Ein Literaturüberblick zum aktuellen Stand der empirischen Forschung

“…7 Frenk (2010;S. 1 McPhail et al (2012;S. 409): "We measure the relative importance of global demand, speculation, and energy in explaining corn price volatility.…”