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This paper tests and confirms the existence of a puzzling phenomenon-the prices of raw commodities have a persistent tendency to move together. We find that this co-movement of prices applies to a broad set of commodities that are largely unrelated, ie for which the cross-price elasticities of demand and supply are close to zero. Furthermore, the co-movement is well in excess of anything that can be explained by the common effects of inflation, or changes in aggregate demand, interest rates, and exchange rates. Our test for excess co-movement is also a test of the standard competitive model of commodity price formation with storage. An innovative aspect of our test, and one that distinguishes it from, say, Eichenbaum's (1983, 1984) tests of finished goods inventory behaviour under rational expectations, is that we do not need data on inventory stocks. Our test relies instead on the joint behaviour of prices across a …