Duration: 10/01/2015 to 09/30/2020

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

Commodity marketing and pricing skills of producers and agribusiness managers have historically been less robust than their production and management skills. Furthermore, commodity marketing and pricing issues are frequently topics of public policy and public debate. The aspiration to better understand commodity markets, therefore, is an important intersection for producers, agribusiness managers, consumers, academics, government agencies, and others groups that interact in public education and policy forums.

Research into applied commodity price analysis, forecasting, and risk management continues to be an area of strong need, especially in light of the dynamic and fluid nature of commodity markets. As markets change, understanding the principles behind those changes is critical for interested parties to respond in an optimal manner. For example, notable issues recently impacting commodity markets include the rapid growth of the bio-fuels industry, concern regarding excess speculation in commodity futures markets, increased volatility of commodity prices, rapid adoption of computerized trading platforms, consolidation of organized futures exchanges, food safety scares, the continued industrialization and structural change of the food and agribusiness sector, and the ever-growing influence of the global food production and consumption environment.

Successful agribusiness management is largely founded on understanding commodity market behavior and effectively using market risk management tools. Recent public policy changes in the 2014 Farm Bill signaled a move toward an expansion of federally subsidized crop insurance programs and continuation of livestock disaster and dairy support payments. Furthermore, recent trading and market scandals had a substantial impact in the development of new futures market regulations and broader regulatory oversight. Government programs and policies impact a large section of agricultural commodity markets and can have important implications for market participants, and investigating the complex interrelationships among government policies and participant behavior is critical to developing a sound understanding and knowledge that will be of value to relevant stakeholders.

Continual development of risk management tools such as options, crop insurance, livestock insurance and a plethora of over-the-counter contracts (e.g., swaps, marketing agreements, weather derivatives and other derivative contracts) dramatically increases the complexity for producers and agribusiness managers along the food and resource supply chain. Therefore, managers and educators need information regarding risks and returns associated with this myriad of price, production and revenue risk management products. Increased globalization makes commodity markets more sensitive to world market conditions, which heightens the need for improved market information and analysis.

Improved forecasting and risk management decisions create important value for both the public and private sectors. However, as complexities of market behavior continue to increase, continued research is necessary to maintain effective forecasting and risk management practices. Knowledge dissemination, analysis and assessment are critical for ensuring that stakeholders understand the potential and limitations of commodity market analysis and risk management tools.

Agricultural economists pursued research interests in price analysis, forecasting, and market risk management for decades. The earliest pursuits at times resulted in fragmented, uncoordinated and duplicated activities. In 1981, agricultural economists with research, extension, and industry focuses were invited to meet, discuss mutual interests in these areas, and organize a multi-state coordinated effort. Since 1983, annual conferences (previously under the project number NCR-134 and more recently NCCC-134) have been held to facilitate this collaborative spirit. Annual attendance by academics (both research and extension), government, industry economists, market analysts, and agribusiness managers ranged between 40 and 80 people since the project's inception. Participants are largely agricultural economists working in academia or in extension positions (at both land grant and non-land grant universities), in government and in industry. Participants come from throughout the United States, Canada, and increasingly the European Union. In recent years, there has been a steady number of industry attendees, helping to bridge the gap between academic research and industry practice. Recent conference formats included keynote speakers, who are frequently leaders in the agribusiness industry.

This multi-state project has been an important facilitator to over 30 years of high-quality applied research. Annually, 30% to 60% of the presented papers become published in peer-reviewed journals. The project also maintains a website that provides important conference announcements and an archive of all presented papers since 1981 (http://www.farmdoc.illinois.edu/nccc134/). The website provides significant benefits as evidenced by over 191,000 hits in 2013. During that year, 20 different papers were viewed or downloaded over 1,000 times. Of those, three papers were more than 5 years old, demonstrating the enduring impact that this project has had on fostering and disseminating research in commodity price analysis, forecasting, and risk management.

The enduring nature of the research associated with the project is in no small part due to the integrative and timely constitution of this research. Topics addressed by the participants represent the most important problem-oriented concerns facing commodity markets. Examples of these topic areas include the usefulness of futures, options and forward contracts for risk management; usefulness of new risk management tools such as over-the-counter contracts; the accuracy of government and private forecasts; basis behavior and basis predictability; the impacts of farm program changes on producer and commodity industry profitability; the impacts of food safety events on commodity prices; the impacts of contracting, captive supplies and marketing agreements on livestock industry profitability; potential market power and resulting influence on consumer and producers prices; the usefulness of crop and livestock insurance schemes; the impacts of the globalization of commodity markets; and the impacts of trade. Further, the group is responsive to emerging issues. The impacts of high-frequency traders, the use of multidimensional distributional assessments, the evaluation of bubbles in commodity markets, and a focus on the effects of expanding international producers and consumers are examples of more recent work and collaboration.

In addition to communication among professionals, the committee plays an important role in mentoring graduate students in a professional setting. Moreover, many graduate students who present papers continue to participate in the conference after completing their education. Many of the current academic participants were active in the conference when they were studying in their respective graduate programs. Today, many of these participants bring their own graduate students to present and participate in an excellent forum dealing with cutting-edge issues and methods in these important applied research areas.

Those attending the NCCC-134 conferences indicated a strong interest in continued dialog about commodity price analysis and risk management issues with other academic, business, and government colleagues. All of the agricultural economists attending the conference, representing various land grant and non-land grant institutions throughout the United States as well as government and industry entities, indicate that they want to continue attending and participating. As a result, there is substantial interest and sufficient need to justify extending the committee for five additional years. The extension of this committee is indeed critical in order to foster continuation of this highly successful multi-state research collaboration in the area of commodity price analysis, forecasting, and risk management.

This is the premier forum where applied commodity market researchers meet, discuss research, educate and learn from students, interact with business economists, develop ideas, discuss the current state of research and outreach, and identify problems to address in the future.

Objectives

Procedures and Activities

The NCCC-134 project will continue to use procedures and activities that have been successful over the history of the project.

NCCC-134 is focused on information sharing and applied research communication. The primary means for achieving this objective is an annual meeting where research of relevant topics is presented. The structure of the meeting will allow discussion, debate, and other communication regarding the presented research as well as relevant broader issues of commodity price analysis, forecasting, and market risk management.

Consistent with past conferences, the annual meeting will be held in the spring, typically in April. The April meeting date is important for maintaining a consistent and expected timetable for NCCC-134 committee participants and the academic and agribusiness community. Continuing the tradition of holding the meeting in April will maximize attendance as well as visibility of the conference.

Papers to be presented at the annual meeting will be selected from a pool of submitted proposals. A formal call for proposals will be distributed in the early fall prior to the meeting, with a review of proposals and finalization of a program in the fall prior to the meeting. Proposals will be reviewed and ranked by a group of NCCC-134 committee members. The conference coordinators and proposal reviewers will ensure that the final program of papers are of high quality, impactful, and that the presenters reflect a representative cross-section of NCCC-134 committee members, universities, research faculty, extension faculty, graduate students, and government and industry analysts/researchers who work in the area of applied price analysis and forecasting. In developing the final program, care will be taken to invite moderators from a broad representation of NCCC-134 committee members, as well as other experts, in order to foster vibrant discussion during presented paper sessions.

The conference will be held over a two-day period. The first day will consist of two concurrent paper sessions. The second day will include two concurrent paper sessions in the morning, followed by a lunch and luncheon speaker. The conference coordinators will focus their efforts on securing a luncheon speaker from industry or government. The luncheon speaker will focus on timely and relevant real world issues in commodity price analysis to complement the academic paper sessions. Following the luncheon speaker, two papers that complement the topics of the luncheon speaker will be presented. This format helps foster considerable discussion related to the theme presented by the luncheon speaker and helps increase industry participation at the luncheon.
After the meeting, authors will work closely with paper session moderators to obtain feedback about their work and incorporate/address issues that were made evident during the paper sessions. Revised and edited papers will be submitted and posted to the NCCC-134 project website hosted by the University of Illinois (http://www.farmdoc.illinois.edu/nccc134/). To date, the NCCC-134 website has had numerous visits and paper downloads (191,000 visits in 2013), and has become a well-known web resource on the topic of commodity price analysis, forecasting, and market risk management. Papers will also be posted on the University of Minnesota Libraries web site, AgEcon Search. This is a searchable database of agricultural economics research and papers. The database is well known and the works in the database are readily available to anyone with web access.

The project will primarily communicate through electronic methods, including email, listserv, NCCC-134 website, and other web postings. Considerable effort will be made to publicize the annual conference to U.S. and international academic institutions (namely land-grant institutions and other institutions that maintain a focus on agriculture and agribusiness), industry organizations, trade groups, and government agencies (e.g., USDA, CFTC) in order to maximize conference participation and maintain a diversity of participants. The project will primarily coordinate the annual meeting but will also relay information on applied commodity price analysis, forecasting, and market risk management topics to any person who has participated in past meetings. This includes related meetings and conferences, special journal issues and other publications, and results of participant research projects. Further, the project will attempt to facilitate communication between professional economists with like interests and needs.

Expected Outcomes and Impacts

Projected Participation

View Appendix E: Participation

Educational Plan

The NCCC-134 project will organize annual conferences involving economists and marketing analysts associated with university research, university extension, business, and government agencies. There will be a call for papers that will encourage new and preliminary research findings to be presented at the annual meeting. The annual conference will be publicized through electronic media and newsletters of agricultural economics professional organizations. Agribusiness trade organizations will be contacted individually to help foster interaction between industry and academic participants.

Papers will be selected and organized by the regional committee to be presented at the annual conference. After peer commentary and review, presented papers will be published in electronic outlets, including the NCCC-134 website and AgEcon Search.

Economists and other industry professionals who work in related commodity industries, agencies, or firms will be invited to each meeting to speak at the luncheon. The invited speaker will be asked to present about real-world problems, issues, needed research, and research experiences.

Working groups will be organized to explore joint research, extension, and publication efforts.

Organization/Governance

The NCCC-134 committee will be governed by an executive committee and coordinated by a chair or co-chairs who are also members of the executive committee. The executive committee is put together such that 1) different geographical locations within the U.S. and the commodities that are produced in those regions are represented; 2) university faculty with research and extension appointments are represented so that there is a balance between applied and basic research; and 3) at least one industry representative is included. Executive committee members will serve as long as they are interested in contributing to the project. Should a committee member resign, the chair will take nominations from other committee members and a repeated-election will be held until a majority vote is achieved. The executive committee will convene in a business meeting immediately following the annual meeting. Input will be solicited from meeting participants as to meeting location, structure, executive committee membership, and chair.

Literature Cited

Attachments

Land Grant Participating States/Institutions

AR, AZ, CA, CO, FL, GA, IA, ID, IL, IN, KS, MI, MN, NC, ND, NE, NH, OH, OK, SD, UT, VA, WA

Non Land Grant Participating States/Institutions

Arizona State University, Southern Illinois University