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Sugar with your Coffee? Fundamentals, Financials, and Softs Price Uncertainty

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  • Genèvre Covindassamy
  • Michel A. Robe
  • Jonathan Wallen

Abstract

We investigate empirically the main factors related to coffee and sugar (“softs”) price uncertainty. We link physical market fundamentals as well as financial variables to (i) market expectations of future price volatility and (ii) the extent to which these two commodities both co‐move with equities. The physical market fundamentals that matter include the state of inventories, weather, and disease outbreaks. Beyond these fundamental factors, our results highlight the crucial role of financial market sentiment in understanding cross market linkages and the magnitude of softs market uncertainty. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 37:744–765, 2017

Suggested Citation

  • Genèvre Covindassamy & Michel A. Robe & Jonathan Wallen, 2017. "Sugar with your Coffee? Fundamentals, Financials, and Softs Price Uncertainty," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(8), pages 744-765, August.
    • Handle: RePEc:wly:jfutmk:v:37:y:2017:i:8:p:744-765
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    Cited by:

    1. Bonato, Matteo, 2019. "Realized correlations, betas and volatility spillover in the agricultural commodity market: What has changed?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 62(C), pages 184-202.
    2. Adjemian, Michael K. & Bruno, Valentina & Robe, Michel A. & Wallen, Jonathan, 2017. "What Drives Volatility Expectations in Grain and Oilseed Markets?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258452, Agricultural and Applied Economics Association.
    3. Laurent Ferrara & Aikaterina Karadimitropoulou & Athanasios Triantafyllou & Theodora Bermpei, 2022. "Commodity currencies revisited: The role of global commodity price uncertainty," EconomiX Working Papers 2022-24, University of Paris Nanterre, EconomiX.
    4. Fabian Hollstein & Marcel Prokopczuk & Christoph Würsig, 2020. "Volatility term structures in commodity markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(4), pages 527-555, April.
    5. Sun, Yanpeng & Mirza, Nawazish & Qadeer, Abdul & Hsueh, Hsin-Pei, 2021. "Connectedness between oil and agricultural commodity prices during tranquil and volatile period. Is crude oil a victim indeed?," Resources Policy, Elsevier, vol. 72(C).
    6. Ding, Shusheng & Cui, Tianxiang & Zheng, Dandan & Du, Min, 2021. "The effects of commodity financialization on commodity market volatility," Resources Policy, Elsevier, vol. 73(C).
    7. An N. Q. Cao & Michel A. Robe, 2022. "Market uncertainty and sentiment around USDA announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(2), pages 250-275, February.
    8. Ouyang, Ruolan & Zhang, Xuan, 2020. "Financialization of agricultural commodities: Evidence from China," Economic Modelling, Elsevier, vol. 85(C), pages 381-389.

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