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Transmission of future prices of corn of the Chicago Board of Trade to the Mexican spot market

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  • Francisco Ortiz Arango

    (Universidad Panamericana, México)

  • Alma Nelly Montiel Guzmán

    (Instituto Politécnico Nacional, México)

Abstract

In Mexico, the use of the coverage program of the Bureau of Market Services and Agricultural Market Development (ASERCA for its acronym in Spanish) is a tool that has been used by corn producers (mainly for white corn) for the acquisition of derived products in the CBOT (Chicago Board of Trade), the underlying element of which is US#2 grade yellow corn. In a high volatility environment regarding the prices of corn, the prices of CBOT should be adjusted with the spot domestic prices to incentivize Mexican producers to participate in the program. However, through a multivariate stochastic volatility analysis during the period of 2007–2012, it was shown that the future price of corn is not strongly related to the prices registered in some states of the country, therefore, it can be inferred that the coverage through the ASERCA program does not properly comply with its objective of protecting the national farmers that grow white corn, despite the fact that its use has increased.

Suggested Citation

  • Francisco Ortiz Arango & Alma Nelly Montiel Guzmán, 2017. "Transmission of future prices of corn of the Chicago Board of Trade to the Mexican spot market," Contaduría y Administración, Accounting and Management, vol. 62(3), pages 941-957, Julio-Sep.
    • Handle: RePEc:nax:conyad:v:62:y:2017:i:3:p:941-957
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    References listed on IDEAS

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    More about this item

    Keywords

    Corn prices; Multivariate stochastic volatility; Chicago Board of Trade.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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