This working paper aims to explain the phenomenon of prices volatility and the significant impact of financial speculation in cereal market. Knowing that a great number of researchers have been investigating the relationship between speculation activity and commodity prices volatility since 2007/8 crisis, our study is particular when it analyzes this impact by introducing the behavior of commercials. Thus, we have tried to identify this effect through risk aversion of commercials. Findings reveal that variables used in the econometric model (Lpx “historical price values, Lal ” long speculators’ position all, Sal “ short speculators’ position all”) are borderline I (1). In cereal market, Commercials are very sensitive to prices evolution, and the long/short speculators’ position variation have an important impact on the behavior of commercials, which engage them in herd behavior, hence the soaring or the sharp drop of cereal prices.
This working paper aims to explain the phenomenon of prices volatility and the significant impact of financial speculation in cereal market. Knowing that a great number of researchers have been investigating the relationship between speculation activity and commodity prices volatility since 2007/8 crisis, our study is particular when it analyzes this impact by introducing the behavior of commercials. Thus, we have tried to identify this effect through risk aversion of commercials. Findings reveal that variables used in the econometric model (Lpx “historical price values, Lal ” long speculators’ position all, Sal “ short speculators’ position all”) are borderline I (1). In cereal market, Commercials are very sensitive to prices evolution, and the long/short speculators’ position variation have an important impact on the behavior of commercials, which engage them in herd behavior, hence the soaring or the sharp drop of cereal prices.