Abstract
Soybean is becoming a prominent agricultural industry due to its versatility of use as inputs for different industrial sectors. Soybean products have a high value and are profitable since its huge supply and wide demand. The soybean economic value does belong to the commercial use of its joint products, soybean meal, and soybean oil. Joint product theory assumes the price of soybeans can be represented as a weighted average of returns from soybean meal and soybean oil less than the processing margin. This indicates there are price relationships between soybean as a raw product towards its meal and oil through crush processing. Therefore, the objective of this research is to investigate the price transmission between these three products and analyzed factors that influencing them. Monthly time series data in respect of international prices were obtained. Augmented Dickey-Fuller (ADF) test and the Johansen cointegration technique were utilized to test the stationarity and the long-run relationship between three variables respectively. The result indicates the existence of one cointegrating long-run equilibrium relationship between these variables. The Vector Error Correction Model (VECM) estimates revealed that soybean price is the only one that reacts to correct equilibrium since oil and meal have huge markets. Keywords: soybean, soybean meal, soybean oil, joint product, VECM
Highlights
Soybean becoming prominent agricultural industries with an increase of 355 million metric tons in the global supply
The average soybean oilseed supply in the last five years was five times larger than the second-highest oilseed supply, which was 344 million metric tons compared to 71 million metric tons of rapeseed (USDA, 2019)
This research examined the data by using the unit root test, the cointegration test, and the estimation of the Vector Error Correction Model (VECM)
Summary
Soybean becoming prominent agricultural industries with an increase of 355 million metric tons in the global supply. Demand for soybean continues to grow in the future as demand for various products. According to Freitas et al (2001), soybean is one of the most traded agricultural products worldwide, possibly because of the varied types of consumption, ranging from the food (human to animal), the medical, and industries. Soybean contributes around 60% to the global oilseed supply. Soybean supply prominently surpasses other oilseed supplies like rapeseed and sunflower seed. The average soybean oilseed supply in the last five years was five times larger than the second-highest oilseed supply, which was 344 million metric tons compared to 71 million metric tons of rapeseed (USDA, 2019)
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