Determinants of real prices of agricultural commodities. The role of inventories and macroeconomic factors (1960-2010)

In recent years, there has been an extraordinary increase in international commodity prices, such as fossil fuels (oil) and agricultural products. This paper analyzes the behavior of real prices of major agricultural commodities (wheat, corn, soybeans and rice) using SVAR models, with short-term restrictions, and annual data covering the period 1960-2010. The results suggest that the prices of these commodities increase with improvements in industrial growth, easy monetary policy, dollar depreciation, and inventory reductions. There is an inverse relation between the ratios inventories/consumption and the real prices of grains