Spot and future prices of agricultural commodities: fundamentals and speculation

Lucia Baldi (), Massimo Peri () and Daniela Vandone ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: This paper investigates the long-run relationship between spot and futures prices for corn and soybeans, for the period January 2004 -September 2010. We apply cointegration methodology in the presence of potentially unknown structural breaks in the commodities prices and we then study the causality relationships between spot and futures prices within each specific sub-period identified, with the aim to analyze where changes in spot and futures price originate and how they spread. Empirical estimates highlight the following evidence: i) breaks relate to events that have significantly affected the supply and demand of corn and soybeans for food and energy purposes; ii) sub-periods consequently identified express different dynamics in the causal relationship between spot and futures prices and support the idea that many factors contributed to the 2007-2008 food price increase.

Keywords: Commodity; futures markets; price discovery; cointegration; structural breaks (search for similar items in EconPapers)
JEL-codes: C32 G13 G14 Q11 (search for similar items in EconPapers)
Date: 2011-01-31
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Citations: View citations in EconPapers (2)

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