A hybrid commodity price-forecasting model applied to the sugar-alcohol sector

Accurate price forecasting for agricultural commodities can have significant decision-making implications for suppliers, especially those of biofuels, where the agriculture and energy sectors intersect. Environmental pressures and high oil prices affect demand for biofuels and have reignited the discussion about effects on food prices. Suppliers in the sugar-alcohol sector need to decide the ideal proportion of ethanol and sugar to optimise their financial strategy. Prices can be affected by exogenous factors, such as exchange rates and interest rates, as well as non-observable variables like the convenience yield, which is related to supply shortages. The literature generally uses two approaches: artificial neural networks (ANNs), which are recognised as being in the forefront of exogenous-variable analysis, and stochastic models such as the Kalman filter, which is able to account for non-observable variables. This article proposes a hybrid model for forecasting the prices of agricultural commodities that is built upon both approaches and is applied to forecast the price of sugar. The Kalman filter considers the structure of the stochastic process that describes the evolution of prices. Neural networks allow variables that can impact asset prices in an indirect, nonlinear way, what cannot be incorporated easily into traditional econometric models.

Price dispersion and price indexes

The traditional theory of price index numbers is based on the law of one price. But in the real world, we frequently observe the existence of an equilibrium price dispersion instead of one price of equilibrium. This article discusses the effects of price dispersion on two price indexes: the cost of living index and the consumer price index. With price dispersion and consumer searching for the lowest price, these indexes cannot be interpreted as deterministic indicators, but as stochastic indicators, and they can be biased if price dispersion is not taken into account. A measure for the bias of the consumer price index is proposed and the article ends with an estimation of the bias based on data obtained from the consumer price index calculated for the city of Sao Paulo, Brazil, from January 1988 through December 2004. The period analysed is very interesting, because it exhibits different inflationary environments: high levels and high volatility of the rates of inflation with great price dispersion until July 1994 and low and relatively stable rates of inflation with prices less dispersed after August 1994.

Access and Affordability of Electricity in Developing Countries

A key objective of developing countries is to provide affordable access to modern energy services in order to support economic and social development. The paper presents a number of arguments for why and in which way energy access and affordability can play a key role in national development programs and in achieving the Millennium Development Goals. Approaches for measuring accessibility and affordability are presented, drawing on case studies of Bangladesh. Brazil, and South Africa, countries with different rates of electrification. Affordability of using electricity is examined in relation to the energy expenditure burden for households and time consumption. Conclusions focus on lessons learned and recommendations for implementing policies, instruments, and regulatory measures to tackle the challenge of affordability. (C) 2011 Elsevier Ltd. All rights reserved.

E-contracting with price configuration for Web services and QoS

The large amount of information in electronic contracts hampers their establishment due to high complexity. An approach inspired in Software Product Line (PL) and based on feature modelling was proposed to make this process more systematic through information reuse and structuring. By assessing the feature-based approach in relation to a proposed set of requirements, it was showed that the approach does not allow the price of services and of Quality of Services (QoS) attributes to be considered in the negotiation and included in the electronic contract. Thus, this paper also presents an extension of such approach in which prices and price types associated to Web services and QoS levels are applied. An extended toolkit prototype is also presented as well as an experiment example of the proposed approach.

Role of price and enforcement in water allocation: Insights from Game Theory

As many countries are moving toward water sector reforms, practical issues of how water management institutions can better effect allocation, regulation, and enforcement of water rights have emerged. The problem of nonavailability of water to tailenders on an irrigation system in developing countries, due to unlicensed upstream diversions is well documented. The reliability of access or equivalently the uncertainty associated with water availability at their diversion point becomes a parameter that is likely to influence the application by users for water licenses, as well as their willingness to pay for licensed use. The ability of a water agency to reduce this uncertainty through effective water rights enforcement is related to the fiscal ability of the agency to monitor and enforce licensed use. In this paper, this interplay across the users and the agency is explored, considering the hydraulic structure or sequence of water use and parameters that define the users and the agency`s economics. The potential for free rider behavior by the users, as well as their proposals for licensed use are derived conditional on this setting. The analyses presented are developed in the framework of the theory of ""Law and Economics,`` with user interactions modeled as a game theoretic enterprise. The state of Ceara, Brazil, is used loosely as an example setting, with parameter values for the experiments indexed to be approximately those relevant for current decisions. The potential for using the ideas in participatory decision making is discussed. This paper is an initial attempt to develop a conceptual framework for analyzing such situations but with a focus on the reservoir-canal system water rights enforcement.

Exergy-based method for analyzing the composition of the electricity cost generated in gas-fired combined cycle plants

The proposed method to analyze the composition of the cost of electricity is based on the energy conversion processes and the destruction of the exergy through the several thermodynamic processes that comprise a combined cycle power plant. The method uses thermoeconomics to evaluate and allocate the cost of exergy throughout the processes, considering costs related to inputs and investment in equipment. Although the concept may be applied to any combined cycle or cogeneration plant, this work develops only the mathematical modeling for three-pressure heat recovery steam generator (HRSG) configurations and total condensation of the produced steam. It is possible to study any n x 1 plant configuration (n sets of gas turbine and HRSGs associated to one steam turbine generator and condenser) with the developed model, assuming that every train operates identically and in steady state. The presented model was conceived from a complex configuration of a real power plant, over which variations may be applied in order to adapt it to a defined configuration under study [Borelli SJS. Method for the analysis of the composition of electricity costs in combined cycle thermoelectric power plants. Master in Energy Dissertation, Interdisciplinary Program of Energy, Institute of Eletro-technical and Energy, University of Sao Paulo, Sao Paulo, Brazil, 2005 (in Portuguese)]. The variations and adaptations include, for instance, use of reheat, supplementary firing and partial load operation. It is also possible to undertake sensitivity analysis on geometrical equipment parameters. (C) 2007 Elsevier Ltd. All rights reserved.

Combined production of sugar, ethanol and electricity: Thermoeconomic and environmental analysis and optimization

Many works have shown the potential of the Brazilian sugarcane industry as an electricity supplier. However, few studies have studied how this potential could be achieved without jeopardizing the production of sugar and ethanol. Also, the impact of modifications in the cogeneration plant on the costs of production of sugar and ethanol has not been evaluated. This paper presents an approach to the problem of exergy optimization of cogeneration systems in sugarcane mills. A general model to the sugar and ethanol production processes is developed based on data supplied by a real plant, and an exergy analysis is performed. A discussion is made about the variables that most affect the performance of the processes. Then, a procedure is presented to evaluate modifications in the cogeneration system and in the process, and their impact on the production costs of sugar, ethanol and electricity. Furthermore, a discussion on the renewability of processes is made based on an exergy index of renewability. As a general conclusion, besides adding a new revenue to the mill, the generation of excess electricity improves the exergo-environmental performance of the mill as a whole. (C) 2010 Elsevier Ltd. All rights reserved.

Phenolic composition of South American red wines classified according to their antioxidant activity, retail price and sensory quality

In this study, 73 South American red wines (Vitis vinifera) from 5 varietals were classified based on sensory quality, retail price and antioxidant activity and characterised in relation to their phenolic composition. ORAC and DPPH assays were assessed to determine the antioxidant activity, and sensory analysis was conducted by seven professional tasters using the Wine Spirits Education Trust`s structured scales. The use of multivariate statistical techniques allowed the identification of wines with the best combination of sensory characteristics, price and antioxidant activity. The most favourable varieties were Malbec, Cabernet Sauvignon, and Syrah produced in Chile and Argentina. Conversely, Pinot Noir wines displayed the lowest sensory characteristics and antioxidant activity. These results suggest that the volatile compounds may be the main substances responsible for differentiating red wines on the basis of sensory evaluation. (C) 2011 Elsevier Ltd. All rights reserved.

Flex cars and the alcohol price

We build a model that incorporates the effect of the innovative ""flex"" car, an automobile that is able to run with either gasoline or alcohol, on the dynamics of fuel prices in Brazil. Our model shows that differences regarding fuel prices will now depend on the proportions of alcohol, gasoline and flex cars in the total stock. Conversely, the demand for each type of car will also depend on the expected future prices of alcohol and gasoline (in addition to the car prices). The model reflects our findings that energy prices are tied in the long run and that causality runs stronger from gasoline to alcohol. The estimated error correction parameter is stable, implying that the speed of adjustment towards equilibrium remains unchanged. The latter result is probably due to a still small fraction of flex cars in the total stock (approx. 5%), despite the fact that its sales nearly reached 100% in 2006. (C) 2009 Elsevier B.V. All rights reserved.

Microscopic origin of non-Gaussian distributions of financial returns

In this paper we study the possible microscopic origin of heavy-tailed probability density distributions for the price variation of financial instruments. We extend the standard log-normal process to include another random component in the so-called stochastic volatility models. We study these models under an assumption, akin to the Born-Oppenheimer approximation, in which the volatility has already relaxed to its equilibrium distribution and acts as a background to the evolution of the price process. In this approximation, we show that all models of stochastic volatility should exhibit a scaling relation in the time lag of zero-drift modified log-returns. We verify that the Dow-Jones Industrial Average index indeed follows this scaling. We then focus on two popular stochastic volatility models, the Heston and Hull-White models. In particular, we show that in the Hull-White model the resulting probability distribution of log-returns in this approximation corresponds to the Tsallis (t-Student) distribution. The Tsallis parameters are given in terms of the microscopic stochastic volatility model. Finally, we show that the log-returns for 30 years Dow Jones index data is well fitted by a Tsallis distribution, obtaining the relevant parameters. (c) 2007 Elsevier B.V. All rights reserved.