Skip to main content Accessibility help
×
Home

A Wavelet Analysis of Price Integration in Major Agricultural Markets

  • Getachew Nigatu (a1) and Michael Adjemian (a2)

Abstract:

We use linear time series and wavelets approach to study the relationships between U.S. and international prices for corn, soybeans, and cotton. We then compare results obtained with each approach and verify that structural breaks discovered with wavelet analysis match those produced with subsequent partial-period cointegration analysis. We find little evidence that short-term fluctuations between domestic and international prices are stable, while long-term relationships for many price pairs experience distinct structural breaks. We further find that even though China is among the largest importers of U.S. agricultural products, its commodity prices share little or no relationship with those prevailing in U.S. markets.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      A Wavelet Analysis of Price Integration in Major Agricultural Markets
      Available formats
      ×

      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      A Wavelet Analysis of Price Integration in Major Agricultural Markets
      Available formats
      ×

      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      A Wavelet Analysis of Price Integration in Major Agricultural Markets
      Available formats
      ×

Copyright

This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited. This is a work of the U.S. Government and is not subject to copyright protection in the United States.

Corresponding author

*Corresponding author. Email: getachew.nigatu@usda.gov

References

Hide All
Adämmer, P., Bohl, M.T., and Gross, C.. “Price Discovery in Thinly Traded Futures Markets: How Thin Is Too Thin?Journal of Futures Markets 36,9(2016):851–69.
Adjemian, M., Garcia, P., Irwin, S.H., and Smith, A.. Non-convergence in Domestic Commodity Futures Markets: Causes, Consequences, and Remedies. Washington, DC: U.S. Department of Agriculture, Economic Research Service, Economic Information Bulletin No. 115, 2013.
Adjemian, M.K., Smith, A., Arita, S., and He, W.. 2019. “Estimating the Market Effect of a Trade War: The Case of Soybean Tariffs.” Paper presented at the Agricultural and Applied Economics Association Annual Meeting, Atlanta, Georgia, July 21–23, 2019.
Aguiar-Conraria, L., Azevedo, N., and Soares, M.J.. “Using Wavelets to Decompose the Time-Frequency Effects of Monetary Policy.” Physica A: Statistical Mechanics and Its Applications 387, 12(2008):2863–78.
Allen, E., and Valdes, C.. Brazil’s Corn Industry and the Effect on the Seasonal Pattern of U.S. Corn Exports. Washington, DC: U.S. Department of Agriculture, Economic Research Service, AES-93, 2016.
Arnade, C., and Hoffman, L.. “The Impact of Price Variability on Cash/Futures Market Relationships: Implications for Market Efficiency and Price Discovery.” Journal of Agricultural and Applied Economics 47, 4(2015):539–59.
Arnade, C., and Vocke, G.. “Seasonal Variation in the Price Discovery Process of International Wheat.” Agribusiness 32, 1(2016):1632.
Bai, J., and Perron, P.. “Estimating and Testing Linear Models with Multiple Structural Changes.” Econometrica 66, 1(1998):4778.
Beckman, J., Dyck, J., and Heerman, K.. The Global Landscape of Agricultural Trade, 1995-2014. Washington, DC: U.S. Department of Agriculture, Economic Research Service, 2017.
Bessler, D.A., Yang, J., and Wongcharupan, M.. “Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs.” Journal of Regional Science 43, 1(2003):133.
Boyd, M.S., and Brorsen, B.W.. “Dynamic Price Relationships for U.S. and EC Corn Gluten Feed and Related Markets.” European Review of Agricultural Economics 13, 2(1986):199215.
Carter, C.A., and Mohapatra, S.. “How Reliable Are Hog Futures as Forecasts?American Journal of Agricultural Economics 90, 2(2008):367–78.
Chang, C.P., and Lee, C.C.. “Do Oil Spot and Futures Prices Move Together?Energy Economics 50(July 2015):379–90.
Cohen, M.X. “Morlet Wavelets in Time and in Frequency.” October 1, 2017. Internet site: https://www.youtube.com/watch?v=wgRgodvU_Ms (Accessed September 3, 2019).
Cooke, B., Nigatu, G., Heerman, H., Landes, M., and Seeley, R.. Global Macroeconomic Developments Drive Downturn in U.S. Agricultural Exports. Washington, DC: U.S. Department of Agriculture, Economic Research Service, AES-94, 2016.
Dickey, D.A., and Fuller, W.A.. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74, 366a(1979):427–31.
Engle, R.F., and Granger, C.W.. “Co-integration and Error Correction: Representation, Estimation, and Testing.” Econometrica 55, 2(1987):251–76.
Federal Reserve Economic Data (FRED). “Daily Rates.” Internet site: https://fred.stlouisfed.org/categories/94 (Accessed June 20, 2018).
Figuerola-Ferretti, I., and Gonzalo, J.. “Modelling and Measuring Price Discovery in Commodity Markets.” Journal of Econometrics 158, 1(2010):95107.
Gale, F., Valdes, C., and Ash, M.. Interdependence of China, United States, and Brazil in Soybean Trade. Washington, DC: U.S. Department of Agriculture, Economic Research Service, OCS-19F-01, 2019.
Gonzalo, J., and Granger, C.. “Estimation of Common Long-Memory Components in Cointegrated Systems.” Journal of Business and Economic Statistics 13, 1(1995):2735.
Goodwin, B.K., and Schroeder, T.C.. “Price Dynamics in International Wheat Markets.” Canadian Journal of Agricultural Economics 39, 2(1991):237–54.
Graps, A.An Introduction to Wavelets.” IEEE Computational Science and Engineering 2, 2(1995):5061.
Hernandez, M.A., Ibarra, R., and Trupkin, D.R.. “How Far Do Shocks Move across Borders? Examining Volatility Transmission in Major Agricultural Futures Markets.” European Review of Agricultural Economics 41, 2(2013):301–25.
Hopkinson, J. Profiles and Effects of Retaliatory Tariffs on U.S. Agricultural Exports. Washington, DC: Congressional Research Service, R45448, 2018.
Irwin, S.H., and Sanders, D.R.. “Financialization and Structural Change in Commodity Futures Markets.” Journal of Agricultural and Applied Economics 44, 3(2012):371–96.
Johansen, S. Likelihood-based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press, 1995.
Joseph, A., Sisodia, G., and Tiwari, A.K.. “The Inter-temporal Causal Nexus between Indian Commodity Futures and Spot Prices: A Wavelet Analysis.” Theoretical Economics Letters 5, 2(2015):312–24.
Kiawu, J., Valdes, C., and MacDonald, S.. Brazil’s Cotton Industry: Economic Reform and Development. Washington, DC: U.S. Department of Agriculture, Economic Research Service, CWS-11d-01, 2011.
Kristoufek, L., Janda, K., and Zilberman, D.. “Comovements of Ethanol-Related Prices: Evidence from Brazil and the USA.” Global Change Biology Bioenergy 8, 2(2016):346–56.
Lee, T.S., Tran, A., Hansen, J., and Ash, M.. Major Factors Affecting Global Soybean and Products Trade Projections. Washington, DC: U.S. Department of Agriculture, Economic Research Service, Amber Waves No. 4, 2016.
Liu, Q., and An, Y.. “Information Transmission in Informationally Linked Markets: Evidence from U.S. and Chinese Commodity Futures Markets.”Journal of International Money and Finance 30, 5(2011):778–95.
MacKinnon, J.G., Haug, A.A., and Michelis, L.. “Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration.” Journal of Applied Econometrics 14, 5(1999):563–77.
Mohanty, S., Meyers, W.H., and Smith, D.B.. “A Reexamination of Price Dynamics in the International Wheat Market.” Canadian Journal of Agricultural Economics 47, 1(1999):2129.
Mokhema, T. “S. Africa Plants Record Soybean Area as Oilseed Demand Rises.” Bloomberg News. February 2, 2015. Internet site: https://www.bloomberg.com/news/articles/2015-02-02/south-africa-plants-record-soybean-area-as-oilseed-demand-surges (Accessed August 6, 2018).
Muhammad, A., and Smith, S.A.. 2018. Evaluating the Impact of Retaliatory Tariffs on U.S. Soybeans in China. Knoxville: University of Tennessee Institute of Agriculture, Extension Report W532, 2018.
Nazlioglu, S.World Oil and Agricultural Commodity Prices: Evidence from Nonlinear Causality.” Energy Policy 39, 5(2011):2935–43.
Ramsey, J.B.The Contribution of Wavelets to the Analysis of Economic and Financial Data.” Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences 357, 1760(1999):2593–606.
Ramsey, J.B.Wavelets in Economics and Finance: Past and Future.” Studies in Nonlinear Dynamics and Econometrics 6, 3(2002):127.
Rapsomanikis, G., Hallam, D., and Conforti, P.. “Market Integration and Price Transmission in Selected Food and Cash Crop Markets of Developing Countries: Review and Applications.” Agricultural Commodity Markets and Trade: New Approaches to Analyzing Market Structure and Instability. Sarris, A. and Hallam, D., eds. Rome, Italy: Food and Agriculture Organization of the United Nations; Cheltenham, UK: Edward Elgar, 2006, pp. 187217.
Rösch, A., and Schmidbauer, H.. WaveletComp: 2014 Guided Tour through Wavelet Analysis. R package version 1.0. Internet site: http://www.hs-stat.com/projects/WaveletComp/WaveletComp_guided_tour.pdf (Accessed August 1, 2017).
Rua, A.Measuring Comovement in the Time-Frequency Space.” Journal of Macroeconomics 32, 2(2010):685–91.
Rua, A.Wavelets in Economics.” Economic Bulletin and Financial Stability Report 8(2012):7179.
Rua, A., and Nunes, L.C.. “International Comovement of Stock Market Returns: A Wavelet Analysis.” Journal of Empirical Finance 16, 4(2009):632–39.
Schwarz, T., and Szakmary, A.. “Price Discovery in Petroleum Markets: Arbitrage, Cointegration and Time Interval of Analysis.” Journal of Futures Markets 14, 2(1994):147–67.
Theissen, E.Price Discovery and Floor Screen Trading System.” Journal of Empirical Finance 9, 4(2002):455–74.
Torrence, C., and Webster, P.J.. “Interdecadal Changes in the ENSO-Monsoon System.” Journal of Climate 12, 8(1999):2679–90.
U.S. Department of Agriculture, Economic Research Service (USDA-ERS). “Feed Grains Database.” 2018. Internet site: https://data.ers.usda.gov/FEED-GRAINS-custom-query.aspx (Accessed June 20, 2018).
U.S. Department of Agriculture, Foreign Agricultural Service (USDA-FAS). “Global Agricultural Trade System Online.” Internet site: https://apps.fas.usda.gov/gats/default.aspx (Accessed June 20, 2018a).
U.S. Department of Agriculture, Foreign Agricultural Service (USDA-FAS). “Production, Supply and Distribution.” Internet site: https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery (Accessed June 20, 2018b).
Vacha, L., and Barunik, J.. “Co-movement of Energy Commodities Revisited: Evidence from Wavelet Coherence Analysis.” Energy Economics 34, 1(2012):241–47.
Vacha, L., Janda, K., Kristoufek, L., and Zilberman, D.. “Time-Frequency Dynamics of Biofuel–Fuel–Food System.” Energy Economics 40(November 2013):233–41.
Wu, Q., and Zhang, W.. “Of Maize and Markets: China’s New Corn Policy.” Agricultural Policy Review 3, 4(2016):79.
Xu, X.Linear and Nonlinear Causality between Corn Cash and Futures Prices.” Journal of Agricultural and Food Industrial Organization 16, 2(2018):116.
Yan, B., and Zivot, E.. “A Structural Analysis of Price Discovery Measures.” Journal of Financial Markets 13, 1(2010):119.
Yang, J., Bessler, D., and Leatham, D.J.. “Asset Storability and Price Discovery of Commodity Futures Markets: A New Look.” Journal of Futures Markets 21, 3(2001):279300.
Yogo, M.Measuring Business Cycles: A Wavelet Analysis of Economic Time Series.” Economics Letters 100, 2(2008):208–12.

Keywords

A Wavelet Analysis of Price Integration in Major Agricultural Markets

  • Getachew Nigatu (a1) and Michael Adjemian (a2)

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed.