Spot and Futures Prices of Agricultural Commodities: Fundamentals and Speculation
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This paper investigates the long-run relationship between spot and futures prices for
corn and soybeans, for the period January 2004 -September 2010. We apply
cointegration methodology in the presence of potentially unknown structural breaks in
the commodities prices and we then study the causality relationships between spot and
futures prices within each specific sub-period identified, with the aim to analyze where
changes in spot and futures price originate and how they spread. Empirical estimates
highlight the following evidence: i) breaks relate to events that have significantly affected
the supply and demand of corn and soybeans for food and energy purposes; ii) subperiods
consequently identified express different dynamics in the causal relationship
between spot and futures prices and support the idea that many factors contributed to
the 2007-2008 food price increase