Commodity Market Analysis: Combining Fundamentals and Technicals

Commodity Market Analysis: Combining Fundamentals and Technicals

Commodity market participants are frequently trying to forecast prices, or anticipate how prices will change in the future. Future price movements are important for producers, merchandisers and all participants in commodity markets, since this information is essential for marketing strategies and risk management plans, among others. Two main approaches have been used to analyze commodity prices: fundamental analysis and technical analysis.

Fundamental analysis focuses on supply and demand variables and their relationship to prices. The main idea is to understand the fundamental forces of supply and demand and analyze how they affect prices. These variables are typically combined in balance sheets, as can be seen for the U.S. soybean market in Table 1. In grain markets the most relevant source of information for balance sheets is the World Agricultural Supply and Demand Estimates (WASDE) report, released monthly by the U.S. Department of Agriculture (USDA).

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about commodity market analysis in this Nov. 12 Cornhusker Economics article by Fabio Mattos, assistant professor in the UNL Department of Agricultural Economics.