Shifting Price Discovery in Local Soybean Markets: Evidence from the Trade War Period

This paper examines how price discovery between soybean crushing plants and river terminals evolved across three price regimes defined by the 2018–2020 US-China Trade War. Using daily cash prices from 37 crushing plants and 81 river terminals across Ohio, Indiana, Illinois, Minnesota, Iowa, and Missouri, we estimate which type of local buyer leads price adjustments in Midwestern soybean markets. We find that price discovery shifted from crushing plants toward river terminals over the study period, with the largest shift occurring after the trade war. Crushing plants have become persistent and less price-reactive buyers due to steady demand from the renewable diesel boom. River terminals, which are exposed to increasingly volatile global export demand, now lead local price adjustments. During the US-China Trade War, all cash prices lost their long-run relationship with nearby futures prices. The loss of long-run price relationships suggests that hedging with soybean futures may have been less effective and more volatile during the trade war, as the cash-futures relationship was disrupted. Following the trade war, the contribution of nearby futures to local price discovery declined, indicating that local delivery points are playing a larger role in price formation. The decrease in price discovery from futures markets coincides with a reduction in daily futures trading volume. These findings have implications for producers, grain merchandisers, and risk managers who rely on local price signals and futures markets for marketing and hedging decisions.