Welcome to Fundamental Price Analysis, the unit that studies the real-world supply and demand forces behind why a commodity's price should move. It is the complement to technical analysis: where the technical price analysis unit reads the chart to judge what and when, fundamental analysis reads economics, politics, weather, and government policy to explain why.
Exam Weight: Part 1 spans ~71% of the exam across Chapters 1-7 combined; NFA does not publish per-unit weights.
Video Resources
What You'll Learn
In this unit, you'll cover:
- Effects of Economic or Political Instability: How wars, sanctions, and upheaval hit either the supply side or the demand side of a market, and why the side that gets hit tells you which direction prices go.
- Supply and Demand Elasticity: How responsive quantity is to a price change, why inelastic markets swing hardest, and why short-run farm supply is locked in once a crop is in the ground.
- U.S. Agricultural Policies: How price-support programs put a floor under farm prices through nonrecourse loans, the loan rate, and the Commodity Credit Corporation.
- Crop Years: Why the marketing year runs harvest to harvest, and how old-crop and new-crop contract months trade on entirely different fundamentals.
Why This Matters
Fundamental questions on the Series 3 reward students who can match a shock to the right side of the market and then read the price direction from there. Instability is not automatically bullish, a loan rate is a floor and never a ceiling, and a drought in the old crop does not have to move the new crop. Keeping these relationships straight is the whole game.
Let's start with the effects of economic or political instability.