Sustainability of Real and Financial Markets

Abstract

Over the past decade, agricultural commodity prices underwent wild swings. Periods of high growth, 2008, were followed by periods of sudden decrease, 2009. The excessive increase in food price volatility is a subject of great interest because it has to do with the survival of mankind. Recent academic studies and policy makers have reached sharply different conclusions about the dynamics of such fluctuations. Also, some of them have indicated the main cause in speculative transactions and in the little regulation of futures markets. Then, this paper analyzes whether agricultural prices increases are due to increased speculative activity, otherwise to factors relating specifically to the commodities markets. The results of this preliminary analysis do not show a direct relationship between the increase in speculative transactions and spot prices, rather a more developed future market can be of benefit also to spot prices, as argued in many academic studies. Further statistical analyses tend to corroborate these conclusions. In fact, the first results of cointegration analysis show that there is no evidence that financial derivative instruments determine the fluctuation of wheat future price.