Market Integration and Price Transmission among Major Cotton Trading Countries

This research evaluates the extent of market integration and direction of price transmission among major cotton trading countries before and after the COVID-19 pandemic. We hypothesize that supply and demand linkages among major production and consumption countries are significantly affected by the COVID-19 pandemic necessitating a closer look at market integration and price co-movements. To test this hypothesis, we collected average monthly spot prices in U.S., India, China, Brazil, Turkey, and Pakistan and daily futures data of U.S., India, and China for cotton from May 2015 to December 2022 and investigate price movements before and after the pandemic. We test separately for the price co-movement and the integration in the futures markets, and between spot and futures markets. Results revealed that market integration increased among all nations after the pandemic. Improved cotton market integration has welfare implications for not only the producers, but also the global public, who are the major consumers.