Transmission of future prices of corn of the Chicago Board of Trade to the Mexican spot market

Francisco Ortiz-Arango () and Alma Nelly Montiel Guzmán
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Alma Nelly Montiel Guzmán: Instituto Politécnico Nacional, México

Contaduría y Administración, 2017, vol. 62, issue 3, 941–957

Abstract: In Mexico, the use of the coverage program of the Bureau of Market Services and Agricultural Market Development (ASERCA for its acronym in Spanish) is a tool that has been used by corn producers (mainly for white corn) for the acquisition of derived products in the CBOT (Chicago Board of Trade), the underlying element of which is US#2 grade yellow corn. In a high volatility environment regarding the prices of corn, the prices of CBOT should be adjusted with the spot domestic prices to incentivize Mexican producers to participate in the program. However, through a multivariate stochastic volatility analysis during the period of 2007–2012, it was shown that the future price of corn is not strongly related to the prices registered in some states of the country, therefore, it can be inferred that the coverage through the ASERCA program does not properly comply with its objective of protecting the national farmers that grow white corn, despite the fact that its use has increased.

Keywords: Corn prices; Multivariate stochastic volatility; Chicago Board of Trade. (search for similar items in EconPapers)
JEL-codes: C32 D52 G13 Q14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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