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Predicting Agri-Commodity Prices: an Asset Pricing Approach


  • Yu-chin Chen

    (University of Washington)

  • Kenneth Rogoff

    (Harvard University)

  • Barbara Rossi

    (Duke University)


Volatile and rising agricultural prices place significant strain on the global fight against poverty. An accurate reading of future food price movements would thus be an invaluable budgetary planning tool for government agencies and food aid programs aimed at alleviating hunger. Using the asset-pricing approach developed in Chen, Rogoff and Rossi (2010), we show that information from the currency and equity markets of several commodity-exporting economies can offer powerful help in forecasting world agricultural prices. Our formulation builds upon the notion that because these countries' currency and equity valuations depend on the world price of their commodity exports, market participants would incorporate expected future commodity price movements into the current values of these assets. As the exchange rate and equity markets are typically much more fluid than the agri-commodity markets (where prices tend to be more constrained by current supply and demand conditions), these asset prices can signal future agricultural price dynamics beyond information contained in the agri-commodity prices themselves. Our findings complement forecast methods based on structural factors such as supply, demand, and storage considerations.

Suggested Citation

  • Yu-chin Chen & Kenneth Rogoff & Barbara Rossi, 2009. "Predicting Agri-Commodity Prices: an Asset Pricing Approach," Working Papers UWEC-2010-02, University of Washington, Department of Economics.
  • Handle: RePEc:udb:wpaper:uwec-2010-02

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    References listed on IDEAS

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    9. C. Peter Timmer & David Dawe, 2007. "Managing Food Price Instability in Asia: A Macro Food Security Perspective ," Asian Economic Journal, East Asian Economic Association, vol. 21(1), pages 1-18, March.
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    Cited by:

    1. Kieran Burgess & Nicholas Rohde, 2013. "Can Exchange Rates Forecast Commodity Prices? Recent Evidence using Australian Data," Economics Bulletin, AccessEcon, vol. 33(1), pages 511-518.

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