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The Impact of Brazil on Global Grain Dynamics: A Study on Cross-market Volatility Spillovers

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  • Avileis, Felipe Grimaldi
  • Mallory, Mindy

Abstract

We will investigate the evolution of the relationship between Brazilian and Global grain markets. Through a three step approach, we will test the series for cointegration, proceed with the adequate modeling (VAR or VECM) and use the residuals of these models to estimate a BEKK GARCH and relative volatility spillovers across two time periods, before and after Brazil started double-cropping. Our results indicate no significant cointegration between corn and soybeans markets before Brazil started double-cropping and significant cointegration after, for both markets. Volatility spillovers dynamics also changes, from no spillovers to spillovers from and to Brazil on corn, and from the US spilling over Brazil to Brazil spilling over to the US on soybeans. Our results are important because they show that the importance of Brazil to global grain price formation is substantial and risk managers must be aware of it in order to perform well.

Suggested Citation

  • Avileis, Felipe Grimaldi & Mallory, Mindy, 2019. "The Impact of Brazil on Global Grain Dynamics: A Study on Cross-market Volatility Spillovers," 2019 Conference, April 15-16, 2019, Minneapolis, Minnesota 309628, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:n13419:309628
    DOI: 10.22004/ag.econ.309628
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    References listed on IDEAS

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    3. Kelvin Balcombe & Alastair Bailey & Jonathan Brooks, 2007. "Threshold Effects in Price Transmission: The Case of Brazilian Wheat, Maize, and Soya Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 308-323.
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