NCDC198: Applied Commodity Price Analysis, Forecasting, and Market Risk Management (NCR134)
(Multistate Research Coordinating Committee and Information Exchange Group)
Status: Inactive/Terminating
NCDC198: Applied Commodity Price Analysis, Forecasting, and Market Risk Management (NCR134)
Duration: 10/01/2003 to 09/30/2005
Administrative Advisor(s):
NIFA Reps:
Non-Technical Summary
Statement of Issues and Justification
Demand for applied commodity price analysis, forecasting, and risk management research has been strong for decades and continues to grow. Marketing pricing skills are an area where agricultural producer and agribusiness manager skills are historically fragile when compared to traditional production and management skills. The USDA publication, "Food and Agricultural Policy: Taking Stock for a New Century," discusses the continued needs in agricultural marketing and price analysis. While the new farm bill, the "Farm Security and Rural Investment Act of 2002," has increased subsidies and the perception of government intervention the latter is not correct. Government payments to producers are decoupled from production decisions and marketing decisions making remain the responsibility of individual producers. This responsibility has magnified the importance of crop and livestock price projections and risk management methods.
Development of alternative risk management tools such as the wide variety of crop and revenue insurance programs has dramatically increased the set of risk management mechanisms available to producers. Producers need better information regarding risks and returns associated with the myriad of price, production, and revenue risk management products. Increased market globalization has made commodity markets much more sensitive to world market conditions which has increased the need for improved market information and analysis. Together, significant and rapid changes in policy, market globalization, and proliferation of alternative risk management tools, have significantly altered many of the factors affecting commodity prices and appropriateness of various risk management strategies.
As a result, improved forecasting and related risk management decisions in both the public and private sectors have greater value. Increased complexities of market behavior enhance the need for improved forecasting and risk management. There is a clear need for better education regarding potentials and limitations of commodity market analysis and risk management tools (such as futures, options, forward contracts, marketing agreements, and forms of production and revenue insurance) available. This includes dissemination of both the information (e.g., price forecasts and forecasting methods) and an assessment of the risks associated with decisions based upon those forecasts using risk management strategies.
Agricultural economists have pursued research interests in price analysis, forecasting, and market risk management for decades. These pursuits have often resulted in fragmented, uncoordinated, and duplicate activities. In 1981, agricultural economists with research, extension, and industry focus were invited to meet, discuss mutual interests in these areas, and organize a coordinated effort. Since 1983, annual conferences have been held which facilitates this collaborative spirit. Annual attendance from academicians, government, and industry economists and market analysts has been in the 60-80 person range. Although most are concentrated in the Midwestern United States, participants represent much of the nation and occasionally provinces of Canada. In addition, many graduate students who presented papers over the years continue to participate in professional capacity now bring their 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 NCR-134 conferences have indicated a strong interest in continued dialog on commodity price analysis and risk management issues with other academic, business, and government colleagues. A high proportion of business economists attending the conference indicate they are interested in attending and participating in the future. As a result, there is substantial interest and sufficient need to justify extending the current regional committee for four additional years to foster the exchange of ideas and stimulate collaborative research efforts.
Objectives
-
Foster an exchange of ideas on research, applications, and dissemination of new developments in applied commodity price analysis, forecasting, and market risk management.
-
Facilitate effective and efficient collaborative research efforts on applied commodity price analysis, forecasting, and market risk management issues.
-
Stimulate interaction between research and extension faculty, academic and business agricultural economists, and development of methodology and addressing of business and policy questions on applied commodity price analysis, forecasting, and market risk management issues.
-