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Strategic Economic Analysis of Agri-Food Markets
FRE 501
Instructor: James (Jim) Vercammen, PhD
Office: Henry Angus Room 264
Office Hours: Mon 3:30 - 4:30,

Wednesday 2:30 - 3:30

Class Schedule: Class: Tues/Thurs 2:30 – 4:00 pm
Classroom: MCML 154
Important Course Pages
Lecture Notes
Course Discussion


Session and term: [2023W1] Class location: [MacMillan 154]

Class times: [Tuesday, Thursday 2:30-4:00 pm]

Lab times: [Occasional, Day/Time TBD]

Course duration: [September 5 to December 7] Credits: [3]


This course uses theoretical and empirical methods to examine agricultural and energy commodity prices. The analysis includes pricing relationships across geographical regions, within vertical supply chains and over time. Commodity futures prices and related derivatives are featured throughout the course. Select segments of the course focus on the environment such as the induced demand for palm oil when soybean oil is diverted to biodiesel. Class homework includes using Python to calculate the profitability of a rolling futures position, and using R to test for cointegration and to estimate other pricing relationships.


Instructor: [James (Jim) Vercammen, PhD]

Phone: [(604) 827 - 3844]

Office location: [Henry Angus Room 264.]

Email: []

Office hours: [Monday 3:30 - 4:30, Wednesday 2:30 - 3:30]


Harry Izatt ( will provide technical support for this course. This includes holding labs and office hours for demonstrating assignment-related empirical methods in Python and R, answering questions about the assignments through office hours (see Canvas for details) and email, and assisting with in-class activities.


By the end of this course, students will be able to:

  1. Explain how commodity futures markets function and the key characteristics of commodity futures prices.
  2. Analyze historic futures price data to estimate the potential profitability of a roll over investment strategy.
  3. Identify the key pricing relationships: across space, over time and within vertical supply chains.
  4. Use statistical methods to test for spatial price integration across geographically distinct markets.
  5. Estimate the speed that transportation costs and input costs pass through and affect downstream prices.
  6. Evaluate the properties of short and long hedging strategies for firms which operate in commodity markets.
  7. Explain how commodity pricing affects the environment through distortions in the biofuel market.


Activity Percent of Grade
Assignment 1 (released September 5, see Canvas for due dates) 6%
Assignment 2 (released September 19, see Canvas for due dates) 4%
Assignment 3 (released October 26, see Canvas for due dates) 4%
Futures market quiz (September 12) 4%
Market commentary (once during the term – see schedule in Canvas) 2%
iClicker questions (several each lecture) 10%
Midterm exam (October 24th) 30%
Final exam 40%
Total: 100%


There is no assigned textbook for this course. On-line readings are posted in the schedule below.


Writing Exams

All exams will be in-person and will follow MFRE exam protocol (See Student Portal). Exams will be online, e.g., in Canvas, but students must be physically present, use the lock-down browser, and invigilated. If a student is unable to write an exam, they must have a verifiable doctor’s note and must contact the Course Instructor, Course Assistant, and MFRE Program Manager before the scheduled exam date/time. If the documentation is considered legitimate, the student will be informed regarding how to proceed.

Late Assignments Penalties and Missed Exam Policies

Assignments which are submitted late but within 24 hours of the due date will have 50 percent of the total points deducted. Assignments submitted more than 24 hours late will not be accepted. If a student misses the midterm exam with a legitimate reason, the weight of the midterm will be shifted to the final exam. If the student misses a final exam, the MFRE Director will be consulted to determine an appropriate course of action. A makeup for a missed final exam is not normally an option.

Plagiarism: You are encouraged to work on the three assignments with a classmate. Having said this, be mindful of MFRE course policy: "Submitting only original work done by you and acknowledging all sources of information or ideas and attributing them to others as required. This also means you should not cheat, copy, or mislead others about what is your work." Minor plagiarism will result in a grade of zero for the assignment. Major plagiarism will result in disciplinary action as determined by the Director of the MFRE program (in the past this has typically result in a minimum of a failing grade for the course). See the last page of this course outline for more details.

ChatGPT: Feel free to use ChatGPT when completing your assignments. Be sure to indicated if and how it was used.

Market Commentary

At the beginning of each class, two students will each make a two minute market commentary presentation (no slides). The presentation should be a summary of previous-day market commentary as reported by industry experts. For example, the presentation may identify the reasons why the price of crude oil fell the previous day. The presentation schedule and subset of commodities to choose from are posted in Canvas.


Similar to MFRE Micro Foundations II (summer course), iClickers will be used throughout the course – see Canvas for details. Points are allocated for the correct answer only (i.e., there are no participation points).


Sept 5 Commodity price overview; intro to futures

Assignment 1 out (roll yield myth)

See assignment for due dates.

Reading1 Reading2

Reading3 Reading4

Sept 7 Introduction of Futures, Continue. Use previous readings
Sept 12 Open-book quiz, 40 minutes (based on slides, Readings 1 – 4)

Spatial law of one price (LOP), U.S. grain catchments,

Reading1 Reading2
Sept 14 Determinants of cross region crude oil price differentials

(in class exercise – bring your laptops)

Reading (intro and lit review)
Sept 19 Transportation cost pass-through (cointegration): palm oil case study

Price discounts for Canadian crude oil exports to the U.S.

Assignment 2 out (Australia wheat prices in R)

See assignment instructions in Canvas for due dates.

Reading1 (ignore last mathy bit)


Reading3 (sections 1 and 2)

Sept 21 Spatial price integration: Africa road network case study

(in class exercise – bring your laptops)

Sept 26 Price pass through in vertical markets: theory and speed of

adjustment with palm oil case study

Sept 28 Pass through of feed costs in live cattle pricing Reading
Oct 3 Substitution: cross price elasticity of vegetable oils Reading
Oct 5 Vegetable oil substitution: implications for palm oil expansion Reading
Oct 10 Pricing of biodiesel: Renewable fuels standard Reading
Oct 12 No Class – Monday Schedule
Oct 17 Commodity price decomposition (using R) and estimation of

persistence of price shocks

Oct 19 Catchup and review
Oct 24 Midterm Exam
Oct 26 Analysis of high frequency oil price data 1

Assignment 3 out (hourly electricity prices, R)

See assignment instructions in Canvas for due dates.

Posted later
Oct 31 Analysis of high frequency oil price data 2 Posted later
Nov 2 Storage and convenience yield

(seasonal pricing patterns: 8 quarter model)

Posted later
Nov 7 Seasonal variation in basis in Texas corn market Posted later
Nov 9 Spatial variation in basis in U.S. Midwest corn market Posted later
Nov 14 Hedging 1

Assignment 4 out (zero credit, solutions will be posted)

Posted later
Nov 16 Hedging 2 Posted later
Nov 21 UBC Closed – Fall Break Posted later
Nov 23 Institutional investment in commodity futures – the roll yield

myth revisited.

Posted later
Nov 28 CME Platts futures Posted later
Nov 29 CME weather derivatives Posted later
Dec 5 Commodity swaps Reading
Dec 7 Catchup and Review



There is no required distribution of recordings of class. Recording will be provided based upon on the decision of the course instructor. Classes are designed as and are intended to be in-person.


All materials of this course (course handouts, lecture slides, assessments, course readings, etc.) are the intellectual property of the instructor or licensed to be used in this course by the copyright owner. Redistribution of these materials by any means without permission of the copyright holder(s) constitutes a breach of copyright and may lead to academic discipline and could be subject to legal action. Further, audio or video recording of classes are not permitted without the prior consent of the instructor.

Missing Classes/Labs

Students are expected to attend all classes, labs, or workshops. If you cannot make it to a class, lab, or workshop due to a medical or personal emergency, email your Instructor, your Course Assistant, and Olivier Ntwali, MFRE Program Coordinator ahead of time to let them know.

Respectfulness in the Classroom

Students are expected to be respectful of their colleagues at all times, including faculty, staff and peers. This means being attentive and conscious of words and actions and their impact on others, listening to people with an open mind, treating all MFRE community members equally and understanding diversity. Students who act disrespectfully toward others will be asked to leave the class and be marked as absent for the day. They may also be removed from a team, lose credit for in‐class assessments and activities, or be asked to complete a group assignment individually.

Respect for Equity, Diversity, and Inclusion

The MFRE Program strives to promote an intellectual community that is enhanced by diversity along various dimensions including status as a First Nation, Métis, Inuit, or Indigenous person, race, ethnicity, gender identity, sexual orientation, religion, political beliefs, social class, and/or disability. It is critical that students from diverse backgrounds and perspectives be valued in and well‐served by their courses. Furthermore, the diversity that students bring to the classroom should be viewed as a resource, benefit, and source of strength for your learning experience. It is expected that all students and members of our community conduct themselves with empathy and respect for others.

Centre for Accessibility

The Centre for Accessibility (CfA) facilitates disability‐related accommodations and programming initiatives designed to remove barriers for students with disabilities and ongoing medical conditions. If you are registered with the CfA and are eligible for exam accommodations, it is your responsibility to let Olivier Ntwali, Academic Program Coordinator, and each of your Course Instructors know. You should book your exam writing with the CFA using its exam reservation system: for midterm exams or quizzes, at least 7 days in advance; and final exams, 7 days before the start of the formal exam period.


Plagiarism and Academic Dishonesty

Academic dishonesty and plagiarism are taken very seriously in the MFRE program. All incidences of plagiarism will be escalated to the MFRE Academic Director with penalties ranging from a mark of zero on the assignment, exam or course to being required to withdraw from the program. Note: If a student needs to extend his/her program due to a failed course or unsatisfactory progress, they will have to pay the full MFRE tuition fees for that term/s.

Academic misconduct that is subject to disciplinary measures includes, but is not limited, to the following:

  • Plagiarism, which is intellectual theft, occurs where an individual submits or presents the oral or written work of another person as his or her own. In many UBC courses, you will be required to submit material in electronic form. The electronic material will be submitted to a service which UBC subscribes, called TurnItIn. This service checks textual material for originality. It is increasingly used in North American universities. For more information, review TurnItIn website online.
  • Using Generative Artificial Intelligence (AI) tools like ChatGPT, Bard, or other Generative AI models to generate content or conduct analysis for evaluations, without proper citation and or if asked not to use AI, is considered plagiarism and academic misconduct. If students use AI in their submissions, they must cite the AI generator using citations consistent with the UBC Academic Honesty Standards.
  • Cheating, which may include, but is not limited to falsification of any material subject to academic evaluation, unauthorized collaborative work; or use of unauthorized means to complete an examination.
  • Working with Others on an Assignment, You are encouraged to work with other students, but you must turn in your own individual assignment. If you have an answer that is too close to another student’s answer, this will be considered academic dishonesty and this will be handled according to the MFRE and UBC policies.
  • Resubmission of Material, submitting the same, or substantially the same, essay, presentation, or assignment more than once (whether the earlier submission was at this or another institution) unless prior approval has been obtained from the instructor(s) to whom the assignment is to be submitted.
  • Use of academic ghostwriting services, including hiring of writing or research services and submitting papers or assignments as his or her own.

Student Responsibility: Students are responsible for informing themselves of the guidelines of acceptable and nonacceptable conduct for examinations and graded assignments as presented via MFRE Code of Conduct; MFRE Turn it in, Course Syllabus, MFRE Instructors; Canvas and UBC academic misconduct policies.

Penalties for Academic Dishonesty: Penalties for academic dishonesty are applied at the discretion of the MFRE program. Incidences of academic misconduct may result in a mark of zero on the assignment, examination, or course, required withdrawal from the program, and/or the matter being is referred to UBC Graduate Studies.