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Empirical analysis of corn and soybean basis in Canada

Author

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  • Getu Hailu
  • Alex Maynard
  • Alfons Weersink

Abstract

The article examines the factors affecting the basis for corn and soybeans using several time-series techniques to account for potential structural breaks, seasonality, residual serial correlation and structural breaks, as well as potential endogeneity and nonstationarity. The spatio-temporal empirical framework is based on storage and trade theories which assume the relationship between nondelivery location's spot price and futures price of a storable commodity depends on opportunity cost of capital, warehousing costs, a convenience yield and shipping costs. The interest rate effect is strong for both crops with shipping costs also affecting soybean basis and own inventory levels positively correlated with corn basis. The effect of the wedge between the price of carrying physical grain and the maximum storage rate on basis is positive for both crops. The empirical results, which are robust to multiple estimators, provide stronger evidence of a structural break for the soybean basis than for the corn basis.

Suggested Citation

  • Getu Hailu & Alex Maynard & Alfons Weersink, 2015. "Empirical analysis of corn and soybean basis in Canada," Applied Economics, Taylor & Francis Journals, vol. 47(51), pages 5491-5509, November.
  • Handle: RePEc:taf:applec:v:47:y:2015:i:51:p:5491-5509
    DOI: 10.1080/00036846.2015.1051654
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    File URL: http://hdl.handle.net/10.1080/00036846.2015.1051654
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    1. repec:ags:jlaare:267606 is not listed on IDEAS
    2. repec:taf:applec:v:49:y:2017:i:12:p:1213-1225 is not listed on IDEAS
    3. Adjemian, Michael K. & Marshall, Kandice K. & Hubbs, Todd & Penn, Jerrod, 2016. "Decomposing Local Prices into Hedgeable and Unhedgeable Shocks," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235874, Agricultural and Applied Economics Association.

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