Volatility in US dairy futures markets

Zaifeng Fan, Jeff Jump, Yiuman Tse and Linda Yu

Journal of Commodity Markets, 2023, vol. 29, issue C

Abstract: US dairy futures markets of Class III milk, butter, cheese, and dry whey exhibit unique volatility patterns under the Federal Milk Marketing Order pricing system. We find that dairy volatilities have a relatively low connectedness among themselves and the overall commodity market. We develop a price information uncertainty measure to investigate dairy markets’ response to government-released information. Dairy futures markets respond to government-released information with increased trading activity. The price information uncertainty measure has a strong positive impact on price volatility across all dairy commodities. We provide evidence that the COVID-19 pandemic increases volatility in dairy commodities. The pandemic also significantly reduces the impact of information uncertainty on volatility.

Keywords: Dairy commodity futures; FMMO pricing; Information uncertainty; USDA announcements; Volatility (search for similar items in EconPapers)
JEL-codes: G13 G18 Q14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:29:y:2023:i:c:s2405851322000666

DOI: 10.1016/j.jcomm.2022.100309

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