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

Published online by Cambridge University Press:  26 January 2015

Lihong Lu McPhail ,
Xiaodong Du  and
Andrew Muhammad
Lihong Lu McPhail
Affiliation:
Economic Research Service, U.S. Department of Agriculture, Washington, DC
Xiaodong Du
Affiliation:
Department of Agricultural and Applied Economics, University of Wisconsin-Madison, Madison, Wisconsin
Andrew Muhammad
Affiliation:
Economic Research Service, U.S. Department of Agriculture, Washington, DC
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Abstract

Despite extensive literature on contributing factors to the high commodityprices and volatility in the recent years, few have examined these causalfactors together in one analysis. We quantify empirically the relativeimportance of three factors: global demand, speculation, and energyprices/policy in explaining corn price volatility. A structural vectorauto-regression model is developed and variance decomposition is applied tomeasure 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.

Keywords

cornglobal demandenergyprice volatilityspeculationstructural vector autoregressionQ11C32G2Q4
Type
Invited Paper Sessions
Information
Journal of Agricultural and Applied Economics , Volume 44 , Issue 3 , August 2012 , pp. 401 - 410
Copyright
Copyright © Southern Agricultural Economics Association 2012

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