Råvaremarkedet og dets futures: Drives prisen af spekulation

Kasper Sommer

Student thesis: Master thesis


The goal for this thesis is to shred some light on the bull market in commodities which ended with the credit crunch in august 2008. And more specifically trying to understand what the driving forces behind the price increases are and what role the future market and speculation on that market have had in the eight years of commodity bull market. The focus is not the entire commodity market, but just three, Wheat, Corn and Cattle. The four main questions for this thesis are: 1: how does the spot price and future price intervene with each other and how to they correlate? 2: What have been driving the commodity prices? 3: has the increased volume in future trading had a negative or positive effect on the market as a whole and the prices? 4: Are there a notable difference in volatility between the spot price and future price for the three chosen commodities and are there a notable difference between these commodities and commodities that are not traded on the future exchange. Through a series of analyses the following was concluded. There is a strong correlation between spot and futures, but in the last seven years, there have been a few periods where the correlation has been weaken. At the same time there have been issues with the convergence on the future market, making it more expensive for the hedgers to insure their products and a turnover ratio shows that the liquidity on the markets have fallen in shorter periods. The conclusion is that with the new comers to the markets, the speculations levels have for a short period weaken the system, but the market was already showing improvement before the credit crunch came. Regaining the volatility there haven’t been any effect of the increased volume, only after the credit crunch did a change occur. So speculation is not damaging the stability. There were no clear proofs of future trading increasing or decreasing volatility, but a sign that volatility kept a more even level than without trading. Furthermore it is shown that the main drivers behind the price increase have been increases in demand, along with a falling US Dollar and increasing oil prices. These three bundled together along with the occurrence of the lowest grain stocks world wide in 2006, have sparked the huge prices increases in late 2006 until 2007-08. the last part of 2007 also saw a sharp rally in buying up commodities due to the financial instability, which in turn might a giving the prices a further push upwards. The final conclusion is that although there is speculation in commodities, they serve a purpose and a good for the markets on the long run, with small upsets in the short run.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2009
Number of pages111