ABSTRACT
This book is about agricultural commodity prices. Commodity prices can be discussed in three dimensions: (1) long-term trends and price volatility over time; (2) pricing relationships at a particular point in time; and (3) the impact of a particular supply or demand shock on the full set of commodity prices (i.e., price integration). Figure 1.1 shows the daily spot price of live steers in the US between June 2004 and June 2009. Notice that steer prices are highly volatile, subject to repeating cycles and do not appear to be trending up or down over time. Figure 1.2 shows the daily spot price of Thai rice over the same June 2004 to June 2009 time period. In contrast to the price of live steers, the price of rice was very stable until early 2008, but then spiked to over US$1,000/tonne by the middle of 2008 and declined substantially along with most other commodity prices with the emergence of the global financial crisis in late 2008. Figure 1.2 reveals a long-term upward trend in the world price of rice.
