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Short-Term Dynamics and Structural Changes in the United States and Brazil Soybean Basis: Seasonality, Volatility, Structural Breaks and Information Flows

Author

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  • Bullock, David W.
  • Wilson, William W.
  • Lakkakula, Prithviraj

Abstract

Recently, the United States - China trade dispute has emphasized the importance of Brazil as a major export competitor in the global soybean market. In this paper, we examine the time series characteristics of United States and Brazilian soybean basis markets for seasonality, changes in mean level, intermarket information flows, and other time series behavior. We specifically examined basis at 31 origins and 2 export locations in the United States and a primary export market in Brazil. The results strongly support the presence of analog seasonality indicating that seasonal patterns vary greatly from year-to-year at all locations. Time series intervention analysis indicates that the United States - China trade dispute had a significant lasting effect on the basis level in the Brazilian market but not in the United States. Granger causality analysis of information flows between the origin and export basis markets prior to and after the announcement of tariffs in the United States - China trade dispute shows a significant dampening effect upon the information flows between the markets following the announcement of tariffs. These results are useful in that they can provide guidance to market practitioners in modeling basis forecasts and also provide useful information regarding the impact of the recent United States – China dispute upon the behavior of these basis markets.

Suggested Citation

  • Bullock, David W. & Wilson, William W. & Lakkakula, Prithviraj, 2020. "Short-Term Dynamics and Structural Changes in the United States and Brazil Soybean Basis: Seasonality, Volatility, Structural Breaks and Information Flows," 2020 Conference, St. Louis, Missouri 309641, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc20:309641
    DOI: 10.22004/ag.econ.309641
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