The Dynamics of the World Cocoa Market
The static framework of traditional microeconomic theory has never provided an entirely satisfying explanation of short- and intermediate-term commodity price behavior. The conventional supply-demand notion, which accounts in general very well for long-term price levels, is not realistic when shorter term price movements are involved. This monograph proposes a dynamic formulation of commodity price fluctuations that answers this deficiency, using the behavior of the world cocoa market as a source of data and a basis for theoretical conclusions.
The conventional static-theoretic explanation of short-term price levels makes use of two major variables – the short-term demand function and the market supply rate – that generate at best an incomplete picture of actual commodity behavior. The author argues for the inclusion in the model of two further dynamic variables – inventories and expectations – and develops a commodity price theory to account for them. The current price level at any moment is shown to be a function of long-run equilibrium price expectations and expected future inventory levels. An analysis of the dynamic behavior of the cocoa market is given in illustration of the theories offered.
Dynamics of the World Cocoa Market offers in addition some valuable data on the cocoa market: a detailed history of cocoa market events during the 1950's and 1960's; comments, in an appendix from market letters during that period; and quantitative data on production expectations, consumption expectations, producer sales rates, and world consumption. The general theoretical content of the book assures it of an audience among economists, particularly specialists in agricultural economics price theory, and applied economics. The cocoa trade – independent dealers, manufactures, and growers – will also welcome the book's publication, as will government officials and commodity speculators working with the cocoa trade.