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Seasonal Soybean Price Transmission between the U.S. and Brazil Using the Seasonal Regime-Dependent Vector Error Correction Model

Byung Min Soon () and Jarrett Whistance ()
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Byung Min Soon: Korea Rural Economic Institute, 601, Bitgaram-ro, Naju-si, Jellanam-do 58321, Korea
Jarrett Whistance: Food and Agricultural Policy and Research Institute, University of Missouri, 200 Mumford Hall, Columbia, MO 65211, USA

Sustainability, 2019, vol. 11, issue 19, 1-9

Abstract: Soybean production and trade in the U.S. and Brazil are seasonal. Our research question is whether the seasonal tendencies cause the price relationship between U.S. and Brazilian soybean prices. Therefore, the objective is to test for seasonality in the price transmission between the U.S. and Brazil soybean prices using the seasonal regime-dependent vector error correction model (VECM). Our results show that the speed of the adjustment for the U.S. soybean price in the first half of the year is greater than the speed of the adjustment for the Brazilian soybean price. However, the pattern of their responses becomes the reverse in the second half of the year. The component share calculated by the result of the VECM with seasonal effects indicates that the U.S. dominates the world soybean market during the second half of the year while Brazil is dominant in the soybean market in the first half of the year. These results give us an important finding that we could not find using the VECM without seasonal effects. Finally, our results imply that the seasonal pattern of production in the U.S. and Brazil could cause the sustainability of the supply chain in the world soybean market.

Keywords: component share; seasonality; seasonal regime-dependent VECM; soybeans; soybean products (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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