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Structural Change in Commodity Markets: Have Agricultural Markets Become Thinner?

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  • Peter S. Liapis

    (OECD)

Abstract

It is generally asserted that markets of internationally traded agricultural commodities are thin and more volatile, but with little supporting evidence. For internationally traded agricultural products, it is not clear what constitutes “thin” markets and how this “thinness” contributes to price volatility. Nonetheless, in the current atmosphere of high food and agricultural prices, the sentiment that international prices are more volatile because agricultural markets are thin, is widely shared. This study examines whether selected agricultural markets have become thinner using a particular notion of market thinness relevant for internationally traded goods – exports as a share of production. The results suggest that for most of the commodities examined from 1970 to 2010 the answer is that markets have not become thinner. To support this conclusion, two other measures are used for a robustness check to round out the analysis and provide a multidimensional picture. These two measures are the number of participants (countries) trading in any market and the level of market concentration as revealed by the Herfindahl Index.

Suggested Citation

  • Peter S. Liapis, 2012. "Structural Change in Commodity Markets: Have Agricultural Markets Become Thinner?," OECD Food, Agriculture and Fisheries Papers 54, OECD Publishing.
    • Handle: RePEc:oec:agraaa:54-en
    DOI: 10.1787/5k9fp3zdc1d0-en
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    Cited by:

    1. Bowen Chen & Nelson B. Villoria & Tian Xia, 2020. "Tariff quota administration in China's grain markets: An empirical assessment," Agricultural Economics, International Association of Agricultural Economists, vol. 51(2), pages 191-206, March.
    2. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0.
    3. Jonathan Brooks & Alan Matthews, 2015. "Trade Dimensions of Food Security," OECD Food, Agriculture and Fisheries Papers 77, OECD Publishing.
    4. Munisamy Gopinath & Feras A. Batarseh & Jayson Beckman, 2020. "Machine Learning in Gravity Models: An Application to Agricultural Trade," NBER Working Papers 27151, National Bureau of Economic Research, Inc.

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