Commodity Modeling and Pricing: Methods for Analyzing Resource Market Behavior

Preface

Resource commodity markets are extremely important to agricultural producers, processors, consumers, foresters, and the wood processing industry and in the mineral and energy industries. They play a central role in economic development, international trade, and global economic and political stability. Globalization and the spectacular growth and industrial development of China, India, and other Southeast Asian countries have significantly added to total resource commodity demands and caused price increases. Additional pressures on prices have come from an increased use of agricultural commodities, particularly corn and sugar, for ethanol production, a recent development that has had significant impacts on food prices. In general, the closer integration of resource markets has been accompanied by growing economic and financial instability.

Resource-producing countries need export revenues: Brazil, from Amazon timber; Chile, from copper; Iraq, from crude oil; South Africa, from diamonds; and Argentina and the United States, from wheat. Resource-consuming countries need imports for industry: China, India, and Japan for raw materials and energy, the United States for crude oil. Because of cycles in consumption and production, these markets face high price instability. More than 60 commodity futures markets exist to ameliorate this problem. World commodity markets are again under scrutiny, and the economic analysis and modeling of these markets is as important as ever before. ...