How Long Will Commodity Prices Remain High?

Dermot J. Hayes, Lisha Li
May 2013  [13-PB 10]

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Suggested citation:

Hayes, D.J. and L. Li. 2013. "How Long Will Commodity Prices Remain High?" Policy brief 13-PB 10. Center for Agricultural and Rural Development, Iowa State University.

Executive Summary

Participants in futures markets have money on the line and therefore have every incentive to collect and analyze as much information as possible. Academic evidence by Richard Just and Gordon Rausser at Berkeley suggests that futures-based price projections are more accurate than those created from econometric models. One problem with the use of futures contracts to project long-term prices is that there is low liquidity for contracts that trade more than three years into the future. Economists at Iowa State have developed a way to extrapolate futures prices for five or more years into the future.