Articles
-
Price formation in financialized commodity markets The role of information
The mid-2000s marked the start of a trend of steeply rising commodity prices, accompanied by increasing
volatility. The prices of a wide range of commodities reached historic highs in nominal terms in 2008 before
falling sharply in the wake of the financial and economic crisis. Since mid-2009, and especially since the
summer of 2010, global commodity prices have been rising again. These developments coincide with major
shifts in commodity market fundamentals, particularly in emerging economies which are experiencing fast
growth, increasing urbanization and a growing middle class with changing dietary habits, including an
increasing appetite for meat and dairy products. In addition, in an attempt to reduce the use of fossil fuels in
energy consumption, a range of food crops are now being used in the production of biofuels, which is being
promoted in a number of countries including those of the European Union (EU) as well as the United States.
The related conversion of land use from crops for food to crops for biofuel production has also affected the
prices of food crops. At the same time, a decline in the growth rates of production and productivity, partly due
to the adverse effects of climate change, has adversely affected the supply of agricultural commodities.
However, these factors alone are not sufficient to explain recent commodity price developments; another
major factor is the financialization of commodity markets. Its importance has increased significantly since
about 2004, as reflected in rising volumes of financial investments in commodity derivatives markets – both
at exchanges and over the counter (OTC). This phenomenon is a serious concern, because the activities of
financial participants tend to drive commodity prices away from levels justified by market fundamentals,
with negative effects both on producers and consumers.
Read full article
-
Authorized Person for MEX NEPAL
Mob: +977 9856030634 -
Biratnagar Branch Manager
Mob: +977 9852033934 -
Our Clearing Member
-
Our Banking Partners
-
-
-
