Duration: 10/01/2005 to 09/30/2010

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

Commodity marketing and pricing skills are an realm where agricultural producer and agribusiness manager skills are historically fragile when compared to traditional production and management skills. Further, commodity marketing and pricing issues are frequently topics of public policy and public debate. The need to understand markets is important for individuals, academics, and the groups which interact in public education and policy forums.

Research into applied commodity price analysis, forecasting, and risk management research has been an area of strong need for decades and continues to be an area of need. Agricultural commodity markets are of such strong interest because of their continual change. Change is ongoing, understanding principles behind change is important, and interest in responding to change is the concern.

Understanding commodity market behavior and market risk management tools remains important for successful agribusiness management. While the 2002 Farm Bill returned producers to a realm of direct payments, these payments are decoupled from production and marketing decisions. Thus, there is less government market intervention and more market response due to economic factors. Further, while government programs and policies impact a large section of agricultural commodity markets - namely feed and food grains, there are large sectors of the agricultural economy have no such issues - namely livestock and meat markets. There are also large sectors of the agricultural economy remain largely deregulated through the 1996 Farm Bill - the largest example here are dairy product markets.

Continual development of risk management tools such as options, crop insurance, swaps, marketing agreements, evolving contracts, weather derivatives, and livestock insurance has dramatically increased the set of risk management tools available to producers. Producers and educators need 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 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 continuing research and education regarding potentials and limitations of commodity market analysis and risk management tools available. This includes dissemination of both the information and an assessment of the risks associated with decisions based upon that information.

Agricultural economists have pursued research interests in price analysis, forecasting, and market risk management for decades. These pursuits have at times 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 facilitate this collaborative spirit. Annual attendance from academicians, government, and industry economists and market analysts has been in the 40-80 person range. Participants represent much of the nation and some provinces of Canada.

This project has over 20 years of high quality applied research to it's credit. In any given year, 30% to 60% of the papers will become published in peer reviewed journals. Further, the research is integrative, and responsive to change and need. Topics addressed by participants in this committee read like a summary of the most important problem-oriented topics. These are the topics that are and have been important to producers, policy makers, and industry groups. Some of those areas include, usefulness of futures, options and forward contracts for risk management, accuracy of government and private forecasts, the impact of farm program changes on producer and commodity industry profitability, the impact of generic advertising on consumers, the impact of food safety events on consumer behavior and market prices, impacts of contracting, captive supplies and marketing agreements on livestock industry profitability, impact of market power on consumer and producers prices, the usefulness of crop and livestock insurance schemes, the impact of the globalization of commodity markets, the impact of trade, and the BSE events in North America and the impact on livestock markets. Further, the group is responsive to new issues. The opening of dairy product markets, the development of sophisticated price, revenue and insurance systems, assessment of market advisory services, and the introduction of weather derivatives are example areas of new work and collaboration.

In addition to communication between professionals, the committee has played a role in mentoring graduate students in a professional setting. Many of the 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. All of the agricultural economists attending the conference indicate 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.

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

Objectives

Procedures and Activities

The NCR-134 project will use procedures and activities that have been successful for the past 20 years and will make use of new technology.

The project is an information sharing and applied research communication project. An annual meeting will be held where papers will be presented. The structure of the meeting is such to allow discussion, debate, and other communication regarding the presented research as well as relevant broader issues. Presented papers will be selected from a pool of submitted proposals.

Revised and edited papers will be posted to 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 communicate through electronic methods: email, listserv, and web postings. 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 communciation between professional economists with like interests and needs.

Expected Outcomes and Impacts

Projected Participation

View Appendix E: Participation

Educational Plan

1. Organize annual conference involving economists and marketing analysts associated with university research, university extension, business, and government agencies. The conference will involve a call for papers where new and preliminary research findings are encouraged. The annual conference will be publisized through electronic media and newsletters of agricultural economics professional organizations.

2. Selected papers will be presented at the conference.

3. Selected papers from the conference organized by the regional committee will be published after peer commentary and review. Papers will be published through electronic media.

4. An economist who works for a related commodity industry or firm will be invited to each meeting to speak at the luncheon. The economist will be asked to speak about real-world problems, issues, needed research, and research experiences.

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

Organization/Governance

This committee will be governed by an executive committee and coordinated by a chair that is also a member 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) there will be at least one industry representative. 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 an 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

Refer to attachment

Attachments

Land Grant Participating States/Institutions

AR, AZ, CO, GA, IA, IL, IN, KS, MI, MN, ND, NE, OH, OK, SC, SD, TX, UT, WI

Non Land Grant Participating States/Institutions

Arizona State University, Southern Illinois University