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Effects of Price Volatility and Surging South American Soybean Production on Short-run Soybean Basis Dynamics

Author

Listed:
  • Zhang, Rui (Carolyn)
  • Houston, Jack E.

Abstract

This study investigates the effects of South American production (SAP) and futures volatility on the soybean price dynamics in terms of their effects on the basis. The results of the econometric model showed that both South American production and futures volatility of the nearby contract have negative effects on the basis though in the forecast model, lagged values of these two factors failed to predict basis change in the future. If information about the change of the expected SAP or futures volatility is available, then the model can predict the changes in basis. This information would be helpful for hedgers to decide the time to lift their hedge.

Suggested Citation

  • Zhang, Rui (Carolyn) & Houston, Jack E., 2005. "Effects of Price Volatility and Surging South American Soybean Production on Short-run Soybean Basis Dynamics," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19038, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrfiv:19038
    DOI: 10.22004/ag.econ.19038
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    References listed on IDEAS

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    1. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2004. "Incorporating Current Information Into Historical-Average-Based Forecasts To Improve Crop Price Basis Forecasts," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19022, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Daniel S. Tilley & Steven K. Campbell, 1988. "Performance of the Weekly Gulf-Kansas City Hard-Red Winter Wheat Basis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 929-935.
    3. Darren L. Frechette, 1997. "The Dynamics of Convenience and the Brazilian Soybean Boom," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1108-1118.
    4. Jiang, Bingrong, 1997. "Corn and soybean basis behavior and forecasting: fundamental and alternative approaches," ISU General Staff Papers 1997010108000013213, Iowa State University, Department of Economics.
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    6. Eugene F. Fama & Kenneth R. French, 2015. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 4, pages 79-102, World Scientific Publishing Co. Pte. Ltd..
    7. Hayenga, Marvin L. & Jiang, Bingrong, 1997. "Corn and Soybean Basis Behavior and Forecasting: Fundamental and Alternative Approaches," Staff General Research Papers Archive 10400, Iowa State University, Department of Economics.
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    Cited by:

    1. Scheresky, Gwen & Wilson, William W. & Bullock, David W., "undated". "Spatial and Logistical Competition for Shipments to China from the United States and Brazil," AE Series 320807, North Dakota State University, Department of Agribusiness and Applied Economics.
    2. Javier Ho & Paul Bernal, 2021. "Estimating a global demand model for soybean traffic through the Panama Canal," Journal of Shipping and Trade, Springer, vol. 6(1), pages 1-23, December.
    3. Bullock, David W. & Wilson, William W., "undated". "Factors Influencing the Gulf and Pacific Northwest (PNW) Soybean Export Basis: An Exploratory Statistical Analysis," Agribusiness & Applied Economics Report 288512, North Dakota State University, Department of Agribusiness and Applied Economics.
    4. William Wilson & Prithviraj Lakkakula, 2021. "Secondary rail car markets for grain transportation and basis values," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 472-488, July.
    5. Kamrud, Gwen & Wilson, William W. & Bullock, David W., 2023. "Logistics competition between the U.S. and Brazil for soybean shipments to China: An optimized Monte Carlo simulation approach," Journal of Commodity Markets, Elsevier, vol. 31(C).

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