Abstract
Soybean production and trade in the U.S. and Brazil are seasonal. Our research question is whether the seasonal tendencies cause the price relationship between U.S. and Brazilian soybean prices. Therefore, the objective is to test for seasonality in the price transmission between the U.S. and Brazil soybean prices using the seasonal regime-dependent vector error correction model (VECM). Our results show that the speed of the adjustment for the U.S. soybean price in the first half of the year is greater than the speed of the adjustment for the Brazilian soybean price. However, the pattern of their responses becomes the reverse in the second half of the year. The component share calculated by the result of the VECM with seasonal effects indicates that the U.S. dominates the world soybean market during the second half of the year while Brazil is dominant in the soybean market in the first half of the year. These results give us an important finding that we could not find using the VECM without seasonal effects. Finally, our results imply that the seasonal pattern of production in the U.S. and Brazil could cause the sustainability of the supply chain in the world soybean market.
Highlights
The seasonal patterns of soybean production in the U.S and Brazil play an important role in international soybean trade flows and the sustainability of the global soybean supply chain
Our study uses the seasonal regime-dependent vector error correction model (VECM) to test whether soybeans and soybean products in the U.S and Brazil are seasonal
The value of the component share (CS) calculated by the speed of adjustment coefficient from the seasonal regime-dependent VECM finds which country dominates the world soybean market in the first and second halves of the year
Summary
The seasonal patterns of soybean production in the U.S and Brazil play an important role in international soybean trade flows and the sustainability of the global soybean supply chain. The seasonal tendencies of soybean production and trade affect seasonal price patterns in the U.S and Brazil soybean market [2]. The relationship between the U.S and Brazil soybean prices in the first half and the second half of the marketing year could be different [4]. U.S soybean exports to importing countries such as China in the second half lead to the rise in the U.S soybean price while the Brazil soybean price falls. The U.S soybean price fall in the first half of the marketing year as the Brazil soybean price rises
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