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Physical and Economic Distance in US Soybean Markets

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  • Flores, Ivan
  • Janzen, Joseph

Abstract

We analyze the shock to US soybean prices in the fall of 2022 caused by drought-induced low water levels on the Mississippi River. We consider how the effects of this shock varied by location relative to observed year-to-year changes in soybean production which were also a function of weather conditions. Both production and supply chain shocks create relative changes in physical and economic distance between soybeans production and end-use locations, especially export terminals at the Gulf of Mexico. We use differences in local soybean prices or basis as a measure of economic distance, we estimate a spatial difference in differences model to understand the relationship between physical and economic distance specifically related to the supply chain shock. Our results show evidence that, on average, physical proximity to the Mississippi river weakened basis by 2.13 cents per bushel of soybeans.

Suggested Citation

  • Flores, Ivan & Janzen, Joseph, 2023. "Physical and Economic Distance in US Soybean Markets," 2023 Conference, April 24-25, 2023, St. Louis, Missouri 379024, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc23:379024
    DOI: 10.22004/ag.econ.379024
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