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 b...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/03/26002712/explains-agricultural-price-movements http://hdl.handle.net/10986/23927 |
| Summary: | 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. |
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