Supply shocks drive up commodity prices, impacting producers and consumers.
The article explores what affects commodity futures prices and how producers hedge against risks. Factors like stock market changes and producer revenues play a role in determining risk premiums. The study shows that when stock market volatility increases, producers are more likely to hedge their risks. Also, the cost of production and the relationship between output and demand impact the risk premium. Overall, the research suggests that certain economic conditions can influence how producers protect themselves in commodity futures markets.