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The efficiency of the South African white maize futures market

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  • Kerry McCullough
  • Barry Strydom

Abstract

The efficiency of futures markets for agricultural commodities is an important issue for participants in the agricultural sector who rely on futures contracts to manage price risk and to assist in planning. Tests of market efficiency in futures markets typically address the relationship between spot and futures prices through the application of cointegration techniques. This study employs both the Engle-Granger's and the Johansen's tests for cointegration in order to examine the efficiency of the futures market in South Africa for white maize, which is the most important commodity traded on the South African Futures Exchange by volume. Near spot and futures prices are found to be cointegrated, and there is evidence to indicate that this market is both unbiased and without a risk premium, indicating a weak-form efficient market. This is in contrast to the findings of previous papers, which examined the early years of this market, and points to an improvement in the efficiency of this market.

Suggested Citation

  • Kerry McCullough & Barry Strydom, 2013. "The efficiency of the South African white maize futures market," Agrekon, Taylor & Francis Journals, vol. 52(3), pages 18-33, September.
    • Handle: RePEc:taf:ragrxx:v:52:y:2013:i:3:p:18-33
    DOI: 10.1080/03031853.2013.821742
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    References listed on IDEAS

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    1. Santos, Joseph M., 2009. "Grain Futures Markets: What Have They Learned?," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53040, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Zapata, T. Randall Fortenbery & Armstrong, Delroy, 2005. "Price Discovery in the World Sugar Futures and Cash Markets: Implications for the Domincan Republic," Staff Paper Series 469, University of Wisconsin, Agricultural and Applied Economics.
    3. Andrew McKenzie & Matthew Holt, 2002. "Market efficiency in agricultural futures markets," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1519-1532.
    4. Moholwa, Motlatjo B., 2005. "Testing for Weak-Form Efficiency in South African Futures Markets for White and Yellow Maize," Graduate Research Master's Degree Plan B Papers 11096, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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    Cited by:

    1. Nordier, Jean-Pierre, 2021. "Identifying possible misspecification in South African soybean oil future contracts," Research Theses 334756, Collaborative Masters Program in Agricultural and Applied Economics.

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