ABSTRACT
This chapter discusses key characteristics of price series of key agricultural commodities (ags) and sets the scene with regard to the risk implied by price movements. As for most commodities, ags prices tend to be considerably volatile, especially in comparison to other asset classes such as equities and bonds. There are several types of participants in the agricultural derivative markets. They may be producers and consumers of the various types of agricultural commodities, as well as transformers and traders. In the context of agricultural commodities, there are two raw material-product spreads: the soya bean crush and the corn crush spread. The soya bean crush refers to the gross processing margin (GPM) of a soya bean processor who buys soya beans and processes them to produce soya meal and soya oil. In a similar way, the corn crush spread refers to the GPM of an ethanol producer who buys corn, processes it and sells ethanol and distiller's dried grains.
