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Financial and Commodity-specific expectations in soybean futures markets

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  • Cao, A.N.Q.
  • Grosche, S.-C.

Abstract

We conceptualize the futures price of an agricultural commodity as an aggregate expectation for the spot price of a commodity. The market agents have divergent opinions about the price development and the price drivers, which initiates trading. In informationally efficient markets, the price will thus reflect expectations about its influencing variables. Using historical decompositions from an SVARX model, we analyze the contribution of financial and commodity- specific expectation shocks to changes in a trading-volume weighted price index for corn and soybean futures on the Chicago Board of Trade (CBOT) over the time period 2005- 2016. Financial expectations are instrumented with the DJ REIT Index, commodity demand expectations with the CNY/USD exchange rate and supply expectations with changes in the vapor pressure deficit. Results show that the price index was affected by cumulative shocks in the REIT index during the time of the food price crisis, but these shocks are only of small magnitude. Weather fluctuations have a minimal impact on the week-to-week fluctuation of the commodity price index. Acknowledgement :

Suggested Citation

  • Cao, A.N.Q. & Grosche, S.-C., 2018. "Financial and Commodity-specific expectations in soybean futures markets," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277538, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277538
    DOI: 10.22004/ag.econ.277538
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