Author
Mallory, Mindy L.
Commodity prices research examines how well prices reveal information, allocate resources, and transfer risk. This review surveys 50 years of work across 11 themes: price discovery, market integration and efficiency, price transmission, volatility spillovers, forecasting, derivatives and hedging, storability, futures convergence, financialization, policy effects and the informational value of USDA reports. Evidence points to nearly efficient markets, where cash and futures impound news quickly across markets related by space, time, and form. However, short-run frictions sometimes emerge. I discuss how data availability and machine learning will advance our understanding and highlight recent papers already pushing the envelope in this direction.
This article analyzes recent volatility spillovers in the United States from crude oil using futures prices. Crude oil spillovers to both corn and ethanol markets are somewhat similar in timing and magnitude, but moderately stronger to the ethanol market. The shares of corn and ethanol price variability directly attributed to volatility in the crude oil market are generally between 10%- 20%, but reached nearly 45% during the financial crisis, when world demand for oil changed dramatically. Volatility transmission is also found from the corn to the ethanol market, but not the opposite. The findings provide insights into the extent of volatility linkages among energy and agricultural markets in a period characterized by strong price variability and significant production of corn-based ethanol.