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Spatial Competition, Arbitrage, and Risk in U.S. Soybeans

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  • Skadberg, Kristopher
  • Wilson, William W.
  • Larsen, Ryan
  • Dahl, Bruce

Abstract

This paper analyzes spatial arbitrage and vertical integration of a U.S. soybean-trading firm. A risk-constrained optimization model using Monte Carlo simulation and copula joint distributions is specified. Results show that spatial-arbitrage payoffs vary regionally. Sensitivity results indicate that payoffs and risks increase as firms become more vertically integrated.

Suggested Citation

  • Skadberg, Kristopher & Wilson, William W. & Larsen, Ryan & Dahl, Bruce, 2015. "Spatial Competition, Arbitrage, and Risk in U.S. Soybeans," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(3), pages 1-15, September.
    • Handle: RePEc:ags:jlaare:210550
    DOI: 10.22004/ag.econ.210550
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    References listed on IDEAS

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    4. Richard J. Sexton & Catherine L. Kling & Hoy F. Carman, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 568-580.
    5. Pier Giorgio Ardeni, 1989. "Does the Law of One Price Really Hold for Commodity Prices?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 661-669.
    6. Spiller, Pablo T & Huang, Cliff J, 1986. "On the Extent of the Market: Wholesale Gasoline in the Northeastern United States," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 131-145, December.
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    8. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-948, December.
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    Cited by:

    1. William, Wilson & Dahl, Bruce & Hertsgaard, David, 2020. "Soybean quality differentials, blending, testing and spatial arbitrage," Journal of Commodity Markets, Elsevier, vol. 18(C).
    2. Kamrud, Gwen & Wilson, William W. & Bullock, David W., 2023. "Logistics competition between the U.S. and Brazil for soybean shipments to China: An optimized Monte Carlo simulation approach," Journal of Commodity Markets, Elsevier, vol. 31(C).
    3. Bai, Xiwen & Lam, Jasmine Siu Lee, 2019. "A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price," Energy Economics, Elsevier, vol. 78(C), pages 412-427.
    4. Javier Ho & Paul Bernal, 2021. "Estimating a global demand model for soybean traffic through the Panama Canal," Journal of Shipping and Trade, Springer, vol. 6(1), pages 1-23, December.

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