The weather premium in the U.S. corn market

Ziran Li, Dermot Hayes and Keri Jacobs

Journal of Futures Markets, 2018, vol. 38, issue 3, 359-372

Abstract: We show that the weather premium, an anecdotal phenomenon in the U.S. corn futures market, can arise from a convex demand function. We further show that the magnitude of the weather premium depends on the carryout and expected yield at harvest. We use data from 1968 to 2015 to evaluate the accuracy of the December futures price as a forecast of the harvest price. A predictable component in the forecast error is consistent with the existence of a time‐varying weather premium. We demonstrate that a passive strategy of routinely shorting the corn December futures does not provide an attractive risk‐adjusted return.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1002/fut.21884

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:38:y:2018:i:3:p:359-372

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
subscrip@blackwellpub.com

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery (contentdelivery@wiley.com).