Exploiting the cointegration properties of the US soy-based market system

Author: Babula Ronald A.   Bessler David A.   Rogowsky Robert A.  

Publisher: Routledge Ltd

ISSN: 1650-7541

Source: Acta Agriculturae Scandinavica, Section C - Economy, Vol.3, Iss.2, 2006-06, pp. : 81-98

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Abstract

Perhaps for the first time, this paper applies Johansen and Juseliusâ–™ methods of the cointegrated vector autoregression (VAR) model to a monthly US system of markets for soybeans, soy meal, and soy oil. Analysis of the error correction or cointegration space illuminates the empirical nature of policy-relevant market elasticities, and of effects of important policy, market, and institutional events on US soy-related markets. A statistically strong US demand for soybeans emerged as the primary cointegrating relation in the error-correction space.