Economic Research Report No. (ERR-165) 51 pp

April 2014

Deconstructing Wheat Price Spikes: A Model of Supply and Demand, Financial Speculation, and Commodity Price Comovement

In 2008, wheat futures prices spiked and then crashed along with prices for other agricultural and non-agricultural commodities. This study uses an econometric model to explain the influence of various factors, including passive speculation by large traders, on wheat prices. Findings show that market-specific shocks related to supply and demand for wheat were the dominant cause of price spikes.

Keywords: Commodity prices, comovement, futures, index funds, speculation, wheat

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Last updated: Tuesday, April 29, 2014

For more information contact: Joseph P. Janzen, Colin A. Carter, Aaron Smith, and Michael Adjemian