Commodity Investing: From Theory to Practice · Dr MAI Huu MinhChapter 3 of 22 · Module 1: Foundations
CHAPTER 3
How Commodity Prices Are Formed
Supply, demand, inventories and cost curves
Opening question
“Why can the price of coffee double in a year while the price of a car barely moves?”
In this chapter
- Why supply and demand react slowly, and why that makes prices jumpy
- Elasticity: how a small shortfall can cause a large price move, with a worked example
- Inventories as a shock absorber and the stocks-to-use ratio
- Spare capacity in oil and other markets
- Cost curves and the marginal producer as the long-run anchor
- Weather, geopolitics, export bans and the US dollar
- How to read a supply–demand balance sheet, step by step
- How world prices reach Vietnamese farmers and consumers
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 3 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Commodity Investing: From Theory to Practice (Volume 2, NXW Investment Library).
Read Chapter 1 freeGet the full book — [email protected]Sections of this chapter
3.1 Prices that do all the work
3.2 Why supply is slow
3.3 Why demand is slow
3.4 Small imbalance, large price move
3.5 Inventories as a shock absorber
3.6 Spare capacity
3.7 Cost curves: the long-run anchor
3.8 Weather, politics and the US dollar
3.9 Reading a market balance
3.10 From world prices to Vietnamese farm gates and pumps