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Globally Distributed Production and the Pricing of CME Commodity Futures

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  • Nicolas Merener

Abstract

I investigate how local supply shocks in the globally distributed production of commodities are incorporated into Chicago Mercantile Exchange (CME) futures prices. I exploit that the soybean market share of the United States (Argentina) decreased (increased) between 1996 and 2010, and use rain, which tends to increase output, as a source of exogenous supply shocks. I find a significantly negative response of CME soybean prices to daily rain across regions and time. Moreover, the impact of local rain on the CME price is approximately linear in the time‐varying local share of global output. Therefore, traders of CME contracts seem to aggregate supply in a globally integrated manner and are exposed to globally distributed shocks. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 35:1–30, 2015

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  • Nicolas Merener, 2015. "Globally Distributed Production and the Pricing of CME Commodity Futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(1), pages 1-30, January.
    • Handle: RePEc:wly:jfutmk:v:35:y:2015:i:1:p:1-30
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    Cited by:

    1. Christophe Gouel, 2020. "The Value of Public Information in Storable Commodity Markets: Application to the Soybean Market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 846-865, May.
    2. Nicolas Merener, 2016. "Concentrated Production and Conditional Heavy Tails in Commodity Returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(1), pages 46-65, January.
    3. Baldi, Florencia & Merener, Nicolas, 2021. "Displacement Risk in Agricultural Commodity Markets: The Impact of Plant-Based Meat," 2021 Annual Meeting, August 1-3, Austin, Texas 314057, Agricultural and Applied Economics Association.
    4. Arunava Bandyopadhyay & Prabina Rajib, 2023. "The impact of Sino–US trade war on price discovery of soybean: A double‐edged sword?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(7), pages 858-879, July.

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