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Price Discovery in Agricultural Commodity Markets: Do Speculators Contribute?

Author

Listed:
  • Martin T. Bohl
  • Pierre L. Siklos
  • Martin Stefan
  • Claudia Wellenreuther

Abstract

Previous literature on price discovery in commodity markets is mainly focused on the question of whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question of how the price discovery process is affected by futures speculation. Using different measures for speculation and hedging and a new price discovery metric, the present study analyzes this relationship for various agricultural commodities. On the whole, the results suggest that speculative activity reduces the level of noise in the futures markets under analysis, while increasing their relative contribution to the price discovery process.

Suggested Citation

  • Martin T. Bohl & Pierre L. Siklos & Martin Stefan & Claudia Wellenreuther, 2019. "Price Discovery in Agricultural Commodity Markets: Do Speculators Contribute?," CAMA Working Papers 2019-42, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2019-42
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/42_2019_bohl_siklos_stefan_wellenreuther.pdf
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    Cited by:

    1. Wei Zhang & Sayed Saghaian & Michael Reed, 2022. "Influences of Power Structure Evolution on Coffee Commodity Markets: Insights from Price Discovery and Volatility Spillovers," Sustainability, MDPI, vol. 14(22), pages 1-27, November.
    2. Lin Xie & Jiahua Liao & Haiting Chen & Xuefei Yan & Xinyan Hu, 2021. "Is Futurization the Culprit for the Violent Fluctuation in China’s Apple Spot Price?," Agriculture, MDPI, vol. 11(4), pages 1-14, April.
    3. A.N. Vijayakumar, 2023. "Declining trade interest in Indian commodity derivatives: a survey-based study on cardamom futures contract," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 28(3), pages 333-346.
    4. Roberto Louis Forestal & Shih-Ming Pi, 2021. "Using Artificial Neural networks and Optimal Scaling Model to Forecast Agriculture Commodity Price: An Ecological-economic Approach," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(3), pages 1-3.
    5. Zhuo Chen & Bo Yan & Hanwen Kang & Liyu Liu, 2023. "Asymmetric price adjustment and price discovery in spot and futures markets of agricultural commodities," Review of Economic Design, Springer;Society for Economic Design, vol. 27(1), pages 139-162, February.
    6. Mert Demir & Terrence F. Martell & Lene Skou, 2025. "Agricultural Futures Contracts as Part of a Sustainable Investment Strategy: Issues and Opportunities," Commodities, MDPI, vol. 4(3), pages 1-20, August.
    7. Don Bredin & Valerio Potì & Enrique Salvador, 2022. "Food Prices, Ethics and Forms of Speculation," Journal of Business Ethics, Springer, vol. 179(2), pages 495-509, August.
    8. Arunava Bandyopadhyay & Prabina Rajib, 2023. "The impact of Sino–US trade war on price discovery of soybean: A double‐edged sword?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(7), pages 858-879, July.
    9. Hachmi Ben Ameur & Zied Ftiti & Waël Louhichi, 2022. "Revisiting the relationship between spot and futures markets: evidence from commodity markets and NARDL framework," Annals of Operations Research, Springer, vol. 313(1), pages 171-189, June.
    10. Adrian Fernandez-Perez & Joëlle Miffre & Tilman Schoen & Ayesha Scott, 2023. "Do spot market auction data help price discovery?," Post-Print hal-04121327, HAL.
    11. Dimitrios Panagiotou, 2025. "Sign and size asymmetries between futures and spot prices in the markets of agricultural commodities," Modern Finance, Modern Finance Institute, vol. 3(3), pages 1-15.
    12. Mukhlis MUKHLIS & Raja MASBAR & Sofyan SYAHNUR & M. Shabri Abd. MAJID, 2020. "Dynamic Causalities Between World Oil Price And Indonesia’S Cocoa Market: Evidence From The 2008 Global Financial Crisis And The 2011 European Debt Crisis," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 217-233, June.

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    Keywords

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    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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