Agricultural Economics Department


Date of this Version



Cornhusker Economics, June 14, 2017,


Copyright 2017 University of Nebraska.


Commodity prices are determined by the dynamics of supply and demand and they oscillate over time according to expectations of market participants, who form and update their outlooks based on new information available in the market. As new information about supply and demand of commodities becomes available, buyers and sellers review their beliefs and trade in the market accordingly. This process of price discovery is crucial for various business decisions in the agricultural sector, such as production, marketing and risk management. For instance, if new information on supply and demand suggests that corn prices will decrease, grain producers might want to choose a risk management strategy that protects them against falling prices.