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Structural Breaks and the Relationship between Barley and Wheat Futures Prices on the London International Financial Futures Exchange

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  • Philip J. Dawson
  • Ana I. Sanjuán
  • Ben White

Abstract

Co-movement between futures prices can arise when commodities are substitutes. Counterintuitively, Dawson and White fail to find a significant long-run link between feed barley and wheat prices on the London International Financial Futures Exchange. This relationship is re-examined using Johansen, Mosconi, and Nielsen's co-integration procedure that permits structural breaks. Results show evidence of co-integration and hence price discovery. There is a significant break in October 2000 following Common Agricultural Policy intervention price reductions, the barley-wheat futures market is perfectly integrated, and the barley price Granger-causes the wheat price. Modeling structural breaks in price relationships appears important. Copyright 2006, Oxford University Press.

Suggested Citation

  • Philip J. Dawson & Ana I. Sanjuán & Ben White, 2006. "Structural Breaks and the Relationship between Barley and Wheat Futures Prices on the London International Financial Futures Exchange," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(4), pages 585-594.
    • Handle: RePEc:oup:revage:v:28:y:2006:i:4:p:585-594
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2006.00324.x
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    1. Zoltán Bakucs & Štefan Bojnec & Imre Fertő, 2015. "Spatial Product Market Integration between Two Small, Open Neighbouring Economies," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 171-187, April.
    2. Bakucs, Lajos Zoltan & Ferto, Imre, 2008. "Price transmission on the Hungarian milk market," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44175, European Association of Agricultural Economists.
    3. Listorti, Giulia & Esposti, Roberto, . "Horizontal Price Transmission in Agricultural Markets: Fundamental Concepts and Open Empirical Issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(01), pages 1-28.
    4. Bamiére, Laure & Martinet, Vincent & Gouel, Christophe & Le Cadre, Elodie, 2011. "Stochastic Viability of Second Generation Biofuel Chains: Micro-economic Spatial Modeling in France," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114238, European Association of Agricultural Economists.
    5. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2022. "Futures–spot price transmission in EU corn markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 679-709, July.
    6. Zolotko, Mikhail & Okhrin, Ostap, 2014. "Modelling the general dependence between commodity forward curves," Energy Economics, Elsevier, vol. 43(C), pages 284-296.
    7. GAIGNE, Carl & LAROCHE DUPRAZ, Cathie & MATTHEWS, Alan, 2015. "Thirty years of European research on international trade in food and agricultural products," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(01), March.
    8. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2011. "Price Discovery in Agricultural Commodities: The Shifting Relationship Between Spot and Future Prices," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114237, European Association of Agricultural Economists.
    9. Roberto Esposti & Giulia Listorti, 2013. "Agricultural price transmission across space and commodities during price bubbles," Agricultural Economics, International Association of Agricultural Economists, vol. 44(1), pages 125-139, January.
    10. Massimo Peri & Lucia Baldi & Daniela Vandone, 2013. "Price discovery in commodity markets," Applied Economics Letters, Taylor & Francis Journals, vol. 20(4), pages 397-403, March.
    11. Lucia BALDI & Massimo PERI & Daniela VANDONE, 2011. "Spot and future prices of agricultural commodities: fundamentals and speculation," Departmental Working Papers 2011-03, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    12. Lajos Zoltán Bakucs & Bernhard Brümmer & Stephan von Cramon-Taubadel & Imre Fertő, 2012. "Wheat market integration between Hungary and Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 19(8), pages 785-788, May.

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