Agricultural commodity markets : reference point for the real value of a currency

McFarlane, I. (2014) Agricultural commodity markets : reference point for the real value of a currency. Modern Economy, 5 (5). pp. 533-540. ISSN 2152-7261 doi: 10.4236/me.2014.55050

Abstract/Summary

Using monthly time-series data 1999-2013, the paper shows that markets for agricultural commodities provide a yardstick for real purchasing power, and thus a reference point for the real value of fiat currencies. The daily need for each adult to consume about 2800 food calories is universal; data from FAO food balance sheets confirm that the world basket of food consumed daily is non-volatile in comparison to the volatility of currency exchange rates, and so the replacement cost of food consumed provides a consistent indicator of economic value. Food commodities are storable for short periods, but ultimately perishable, and this exerts continual pressure for markets to clear in the short term; moreover, food calories can be obtained from a very large range of foodstuffs, and so most households are able to use arbitrage to select a near optimal weighting of quantities purchased. The paper proposes an original method to enable a standard of value to be established, definable in physical units on the basis of actual worldwide consumption of food goods, with an illustration of the method.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/36793
Identification Number/DOI	10.4236/me.2014.55050
Refereed	Yes
Divisions	Life Sciences > School of Agriculture, Policy and Development > Department of Crop Science
Uncontrolled Keywords	Agriculture, Commodity, Currency, Econometrics, Volatility
Publisher	Scientific Research Publishing Inc.
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