Commodity futures markets: a survey

Carter, Colin A.

doi:10.1111/1467-8489.00077

Cited by 85 publications

(50 citation statements)

References 143 publications

(165 reference statements)

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“…Moreover, this confirms the general findings of empirical studies on commodity futures markets (see Cox 1976or Carter 1999, for a review), which show that the forward price conveys some information that increases the predictability of spot prices. However, we should note that primeur sales do not have all the typical features of forward contracts, since there is no guarantee on the quality of the wine that is going to be delivered.…”

supporting

confidence: 87%

The Pricing of Experience Goods: The Example ofen primeurWine

Ali

Nauges²

2007

American J Agri Economics

111

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The market for "primeur" wine in the Bordeaux region allows producers to sell wine that is still in barrels. As with all experience goods, producers send quality signals to uninformed buyers. Using original data on Bordeaux wines, we show that the pricing behaviour of producers depends to a large extent on their reputation, and much less on short-term changes in quality (as measured by experts' grades). We also find that the primeur price has an informative role, since a 10 percent increase in primeur price leads to a 3 percent increase in prices on the market for bottled wine.Keywords: Bordeaux wine, experience good, panel data, quality signal, reputation. Suggested running head:The pricing of en primeur wine While writing this article, Héla Hadj Ali was working as a research fellow at INRA (National Institute for Research in Agriculture), Toulouse (France). Céline Nauges is a senior research fellow at INRA, Toulouse (France).The authors wish to thank Pierre Dubois, Valérie Meunier, Katrin Millock, Michel Simioni, Alban Thomas, Ian M. Sheldon (the editor), Michael Visser, and two anonymous reviewers for their useful comments and suggestions that materially improved the article. The usual caveats apply.-1 -Most food products can be classified as experience goods (Nelson 1970;1974) because their quality can rarely be ascertained before actual consumption.1 A substantial part of the theoretical literature dealing with experience goods has focused on sellers' activity to inform consumers in their purchases, particularly the role of signaling and reputation. Prices, advertising expenditure (Milgrom and Roberts 1986) and warranties (Grossman 1981) are textbook illustrations of how a monopolist can signal the high quality of his product in a game with asymmetric information. Shapiro (1983) emphasized the role of reputation in a perfectly competitive environment by describing how consumers form rational expectations on the quality of experience goods based on the quality of goods produced in the past.In the particular case of food products, producers often choose labeling as a signal of quality. Bureau and Valceschini (2003) showed that labeling helps promote differentiated products and allows small producers to benefit from a well-established collective reputation.More generally, the use of food labels is said to create the potential for price premia (Henneberry and Armbruster 2003).Quantitative measures of these "price premia" are quite rare, as well as, more generally, analyses of the pricing strategy and signaling activity of producers in markets for food products. This is especially the case when compared with hedonic studies that measure the consumers' assessment of food product attributes (see McCluskey and Loureiro 2003, for a review). This article contributes to the empirical literature on experience goods by analysing the pricing behaviour of wine producers from the well-known Bordeaux region in France.Original data on two markets (for "primeur" wine and for bottled wine) provide a unique opportunity to obt...

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supporting

confidence: 87%

The Pricing of Experience Goods: The Example ofen primeurWine

Ali

Nauges²

2007

American J Agri Economics

111

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“…Reviews of the literature are provided by Carter (1999), Kamara (1982), and Gray and Rutledge (1971), among others. 5 Momentum in commodity futures has been documented by Pirrong (2005), Erb and Harvey (2006), Miffre and Rallis (2007), and Shen, Szakmary, and Sharma (2007).…”

Section: Momentum In Commodity Futures Excess Returnsmentioning

confidence: 99%

The Fundamentals of Commodity Futures Returns

2012

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Commodity futures risk premiums vary across commodities and over time depending on the level of physical inventories, as predicted by the Theory of Storage. Using a comprehensive dataset on 31 commodity futures and physical inventories between 1969 and 2006, we show that the convenience yield is a decreasing, non-linear relationship of inventories. Price measures, such as the futures basis ("backwardation"), prior futures returns, and prior spot returns reflect the state of inventories and are informative about commodity futures risk premiums. The excess returns to Spot and Futures Momentum and Backwardation strategies stem in part from the selection of commodities when inventories are low. Positions of futures markets participants are correlated with prices and inventory signals, but we reject the Keynesian "hedging pressure" hypothesis that these positions are an important determinant of risk premiums.* The paper has benefited from comments by seminar participants at

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“…Carter (1999) showed that most of the literature concerning hedge in the past fifty years investigates the optimal hedge ratio.…”

Section: Literature Reviewmentioning

confidence: 99%

Comparative analysis of the hedging effectiveness for soybean using ols and bivariate Garch Bekk Model

Caldarelli¹,

Souza²

2011

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Dynamic hedging effectiveness for soybean farmers in Rondonópolis (MT) with futures contracts of BM&F-BOVESPA is calculated through optimal hedge determination, using the bivariate GARCH BEKK model, which considers the conditional correlations of the prices series, comparing the results with the minimum variance model effectiveness, calculated by OLS, the unhedged and the naïve hedge positions. The financial effectiveness of the dynamic hedge model is superior and can be used by farmers for several decision making purposes such as price discovery, hedging calibration, cash flow projections, market timing, among others.Keywords: Dynamic hedge; minimum variance; soybeans; Mato Grosso. Resumo: As taxas ótimas de hedge para os produtores de soja em Rondonópolis (MT), através de contratos futuros da BM&F-BOVESPA, são comparadas através das duas principais abordagens para a determinação de hedge ótimo, o modelo de mínima variância, por MQO, e o modelo GARCH BEKK bivariado, o qual considera

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Commodity futures markets: a survey

Cited by 85 publications

References 143 publications

The Pricing of Experience Goods: The Example ofen primeurWine

The Pricing of Experience Goods: The Example ofen primeurWine

The Fundamentals of Commodity Futures Returns

Comparative analysis of the hedging effectiveness for soybean using ols and bivariate Garch Bekk Model

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