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How Related Are the Prices of Organic and Conventional Corn and Soybean?

Author

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  • Singerman, Ariel
  • Lence, Sergio H
  • Kimble-Evans, Amanda

Abstract

Cointegration was tested between organic and conventional corn and soybean markets in several locations throughout the U.S. using a unique dataset. Organic prices were found to behave like pure jump processes rather than diffusions. A simple specification for pure jump processes is introduced and used with Monte Carlo methods to compute appropriate critical values for unit-root and cointegration tests. The findings indicate that no long-run relationship exists between organic and conventional prices, implying that price determination for organic corn and soybean is independent from that of the conventional crops. This suggests that organic corn and soybean prices are driven by demand and supply forces idiosyncratic to the organic market. For each crop, cointegrating spatial relationships are found between prices at the main organic markets. However, such relationships are generally weaker than the ones for the corresponding conventional prices, implying that organic markets are more affected by idiosyncratic shocks than conventional markets.

Suggested Citation

  • Singerman, Ariel & Lence, Sergio H & Kimble-Evans, Amanda, 2014. "How Related Are the Prices of Organic and Conventional Corn and Soybean?," ISU General Staff Papers 201401010800001069, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201401010800001069
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    Cited by:

    1. Drugova, Tatiana & Pozo, Veronica & Curtis, Kynda, 2018. "Forecasting Organic Wheat Prices: Do Conventional Prices Play a Role?," Journal of Food Distribution Research, Food Distribution Research Society, vol. 49(1), March.
    2. Eric J. Belasco & Kate Binzen Fuller, 2022. "Who buys crop insurance? Predictors of the participation gap between organic and conventional farms," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1554-1572, September.
    3. Dolgopolova, Irina & Roosen, Jutta, 2018. "Competitive niche in milk pricing: Analyzing price dynamics of GMO-free, organic, and conventional milk in Germany during 2009–2010," Food Policy, Elsevier, vol. 78(C), pages 51-57.
    4. Raszap Skorbiansky, Sharon & Adjemian, Michael K. & Saitone, Tina L. & Sexton, Richard J., 2017. "Price Determination and Margin Volatility in Thinly Traded Commodity Markets: An Application to Major U.S. Field Crops," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258577, Agricultural and Applied Economics Association.
    5. Sharon Raszap Skorbiansky & Michael K Adjemian, 2021. "Not All Thin Markets Are Alike: The Case of Organic and Non‐genetically Engineered Corn and Soybeans," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 117-133, February.
    6. Luca Cattivelli & Federico Antonioli, 2023. "When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 744-761, July.
    7. Carlson, Andrea & Greene, Catherine & Raszap Skorbiansky, Sharon & Hitaj, Claudia & Ha, Kim & Cavigelli, Michel & Ferrier, Peyton & McBride, William, 2023. "U.S. Organic Production, Markets, Consumers, and Policy, 2000-21," USDA Miscellaneous 333551, United States Department of Agriculture.

    More about this item

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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