Agricultural Commodity Markets Research Articles

Does speculation impair informational efficiency? New evidence from the Indian agricultural commodity market

Purpose This study explores the association between market efficiency and speculation. The government of India temporarily banned the futures trading of various commodities several times citing the presence of speculation. Many controversies exist about this topic; thus, this study clarifies the association between market efficiency and speculation and investigates whether market reforms altered this association.Design/methodology/approach The data for nine commodities is collected from the National Commodity and Derivative Exchange (NCDEX) for 2005–2022. Regression analysis and Automatic Variance Ratio (AVR) were adopted to inspect the informational efficiency and influence of speculation in the commodity market. Furthermore, this study uses different sub-samples to understand the changes in the market microstructure and its effects on market quality.Findings The results confirm an inverse and significant relationship between information efficiency and speculation and a deviation from the random walk process observed. Therefore, return predictability exists in the market. This study confirms that market reforms do not reduce the influence of speculation on market efficiency. The study concludes that the market is not weak-form efficient.Research limitations/implications This study has certain limitations, since this study is empirical in nature, it may possess the limitations of empirical research.Originality/value This paper has dual novelty. First, this study investigates the effects of market reforms. Second, this study captures the influence of speculation in the Indian agricultural commodity market by considering the market microstructure aspects.

Weathering market swings: Does climate risk matter for agricultural commodity price predictability?

The challenges posed by climate change on the agricultural market have become a pressing concern. An accurate reading of future agricultural commodity prices can be an invaluable planning instrument for diverse interested parties. Here, we explore asset pricing implications of climate risk for the agricultural commodity market from January 2005 to December 2021. Through introducing a composite climate risk index based on the four individual climate risk measures of Faccini et al. (2023), our findings provide valuable insights into the time-series predictability of aggregate climate risk on future agricultural commodity returns, both in- and out-of-sample. This powerful predictability conveys substantial economic benefits to mean–variance investors and cannot be subsumed by conventional economic predictor variables. The evidence further suggests that physical risk, especially global warming, exhibits much stronger return predictability than transition risk. Moreover, we emphasize the pivotal role of climate risk in shaping supply dynamics and capturing investor attention, thereby serving as potential drivers of return predictability. Overall, these predictive insights hold important implications for risk management, investment strategies, and policy formulation in the agricultural commodity market.

Agricultural commodity market response to Russia's withdrawal from the grain deal

AbstractThis paper assesses the response of agricultural commodity markets to Russia's withdrawal from the Black Sea Grain Initiative (BSGI). Employing daily commodity‐level data and event study methods, we analyse the impact on seven agricultural commodities and four key market metrics, including futures prices, historical and implied volatility, and speculative pressure. Our findings show a statistically insignificant increase of 1.1% in agricultural futures prices within the first seven trading days following the BSGI termination. In the following days, futures prices began to decline, eventually returning to levels below those observed before the withdrawal, a pattern further underscored by our implied volatility analysis. While there is no evidence of heightened speculation, we find some evidence for treatment differences across agricultural commodities. These findings suggest that traders did not believe in the likelihood of a blockade of Black Sea grain shipments.

Agricultural Commodity Markets in Pakistan: Analysis of Issues

EXECUTIVE SUMMARY Agriculture markets in Pakistan are still primarily based on a colonial-era model and have not modernised with changing times. This has increased unnecessary costs in the supply chains that put growers and end-consumers at a disadvantage. Additionally, price and supply volatility causes insecurity for policy-makers as information about prices, supply and demand is not structured, timely or reliable. For decades, agricultural markets have functioned without government focus on innovation. Recent initiatives from various federal and provincial agencies provide hope that this vital area can now finally be addressed. Numerous constraints need to be resolved to bring meaningful change to the ecosystem. The process must start with a fresh policy look and commitment to adopt modern themes. This policy process can be supported by technology and successful lessons from other countries as well as developments in other sectors within the country. There is a need to develop a certain level of coordination between various federal and provincial agencies. The increasingly fragmented nature of agriculture markets might be useful for some stakeholders as they can innovate according to their needs but it leaves most of the sector at a continually suboptimal level. The lack of progress in modernising core markets has also made it difficult for some innovative solutions to succeed. A rapid assessment of the current environment, key constraints and recommendations for possible development areas is presented in this report.

Employing Technology for Development: Examining the MCX Agricultural Commodities Market in India

Employing Technology for Development: Examining the MCX Agricultural Commodities Market in India

Marketing of agricultural products through e-NAM in Tamil Nadu state

Integrating technology in agricultural marketing has marked a transformative milestone in Tamil Nadu, where agriculture is a cornerstone of the economy. The National Agriculture Market (e-NAM) has redefined traditional methods, creating a unified national market for agricultural commodities. This study focuses on marketing selected agricultural products through e-NAM in Tamil Nadu, analyzing trade records from 2017 to 2021, and forecasting up to 2025-2026. Focusing on efficiency and transparency, the study explores the impact of e-NAM on the agricultural trade market. Secondary data spanning 2017-2021 from the Department of Agriculture, Cooperation & Farmers Welfare, and the National Agricultural Market were collected and analyzed using charts and forecasting methods. Trade records for arrived and traded lots, quantities, and values in Tamil Nadu displayed consistent growth. The arrival of lots increased steadily, reflecting potential market expansion. Traded lots and quantities showcased dynamic growth, indicating an expanding trade market. Forecasted values predict a positive trajectory with continuous growth up to 2025-2026. The study underscores the transformative impact of e-NAM in Tamil Nadu. The positive trade quantity and value trends reveal a dynamic and expanding market. Forecasted projections suggest sustained growth, emphasizing the role of the platform in enhancing market efficiency and economic development. While optimistic, acknowledging external factors is crucial for stakeholders to navigate potential challenges. The success of e-NAM exemplifies technologies transformative power in fostering sustainable development in the Tamil Nadu agrarian sector.

Agricultural commodities market reaction to COVID-19

This study examines the volatility transmission mechanism in agricultural futures returns during crisis periods, with a specific focus on the COVID-19 pandemic. The research employs the Markov Switching model to analyze the market dynamics of key agricultural commodities—cotton, sugar, rice, wheat, and corn. The study period is divided into three phases: Pre-COVID, COVID, and Post-COVID, allowing for a comprehensive analysis of market trends and shifts in response to the pandemic. Key findings reveal significant disruptions and heightened volatility in these markets during the COVID-19 period, with notable deviations from traditional market behaviors. The research reveals how various macroeconomic factors, such as the S&P 500, US 10-year Treasury bills, Brent crude oil prices, and the US Dollar Index, distinctly affect these commodity markets. Crucially, it sheds light on the dual nature of these markets, demonstrating both their resilience and susceptibility to worldwide disruptions, along with their recovery patterns following the pandemic. The policy implications of these findings are crucial for investors and policymakers. The study provides insights into managing and mitigating the impacts of global crises on essential commodities, emphasizing the need for robust strategies to navigate future market uncertainties. Additionally, the research contributes to the broader discourse on the interplay between macroeconomic conditions and agricultural market dynamics, offering valuable perspectives for informed decision-making in these sectors.

The Impact of Climate Change Debate on Agricultural Commodity Markets

Cet article examine l’impact économique du débat autour du changement climatique sur les marchés de produits agricoles. Il montre, en particulier, comment et quand l’attention du public au terme « climate change » (changement climatique) et « global warming » (réchauffement de la planète) influence les prix des futures sur le soja. En nous appuyant sur une analyse de la cohérence par ondelettes, nous identifions les périodes de haute cohérence et analysons la relation entre, d’une part, l’attention du public et, d’autre part, les événements climatiques extrêmes et les variations climatiques. En outre, nous examinons la relation entre l’attention du public et les variations inattendues du prix du soja et analysons l’effet de certains événements qui attirent l’attention. Nos résultats suggèrent que l’attention du public a un effet significatif et transversal sur les prix des futures sur le soja.

Vulnerability of the Agricultural Commodity Markets in Ghana to Global Oil Price Fluctuations: An Empirical Analysis

Despite the advocacy for climate change goals and encouragement for renewables, crude oil continues to dominate the energy markets. Crude oil price, however, is prone to global price fluctuations. Analyses of these effects on agricultural commodity markets in Ghana is neglected which this study seeks to answer. A nonlinear approach (NARDL) is employed in evaluating the effects of global oil price fluctuation on Ghana’s agricultural commodity market vulnerability, proxied by their producer prices. Different indicators are used since crude price fluctuations might have varying impacts on macroeconomic indicators in both magnitude and signs. Quarterly time series data are sourced from different institutions including data from the Bank of Ghana, FAO, and British Petroleum Statistical Review spanning from 1980: Q1 to 2019: Q4. Empirical results indicate that crude oil price fluctuations have different signs and magnitude for agricultural food commodities prices for both short- and long-runs. The findings of the study bring to bear how the agricultural activities in Ghana respond to variability in global crude oil prices. Policies mitigating changes in prices of animal products ought to be grounded on other issues instead of changes in crude oil prices. Also, programs such as “Planting for Food and Jobs” must be implemented in effectively. JEL Classification: Q02; C32; E31; H23

Risk Spillover from World Energy Markets to Pakistan Agricultural Commodity Markets. An application of Dependence switching Copula model

Risk Spillover from World Energy Markets to Pakistan Agricultural Commodity Markets. An application of Dependence switching Copula model

PERCEPTION OF FARMERS ABOUT E-NAM AND DIGITAL MARKETING APPLICATIONS

In India, a slew of market-distorting laws and regulations stymie the growth of an integrated agricultural market. In 2016, the Indian government launched National Agriculture Market, or e-NAM, is a pan-India electronic trading system, that integrates the current APMC mandi to establish a unified national market for agricultural commodities, allowing farmers to sell their produce at the highest prices accessible anywhere in the country. The study was conducted in three districts of Telangana to examine the perception of farmers about e-NAM and digital marketing applications covering a random sample of 90 farmers. It is found that e-NAM creates a platform for farmers with an efficient supply chain to sell their produce anywhere to get a remunerative price and abolish fragmented markets. It also has considerable potential to increase competition, remove information asymmetry, and promote real-time price discovery. The majority of the farmers were having a medium level of perception about the use of e-NAM and digital marketing applications. It can be inferred that there is a need to create awareness, increase knowledge and educate the farmers as to how the e-NAM and digital marketing applications bring advantages to the marketing of their produce which will help them improve their livelihood and income level.

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Abstract This research investigates the impact of oil price fluctuations on food prices in Saudi Arabia between 1979 and 2020 using Nonlinear Autoregressive Distributed Lags (NARDL) methodology. The study employs Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to determine the integration order of the variables and Bounds testing to confirm the existence of long run cointegration relationships between each variable. The results indicate that oil shocks influence food prices through several mechanisms. Firstly, the cost of energy increases due to the rise in oil prices, affecting the agricultural commodity market, including farm equipment, food processing, packaging, and distribution costs. Secondly, the demand for agricultural commodities to produce biofuels affects food availability and thus food prices. Thirdly, as an oil-based economy, the oil price shock affects food prices through its impact on government spending, which affects aggregate demand and liquidity. Therefore, Saudi Arabia should adopt appropriate policies to mitigate the impact of oil price shocks on food prices, including investing in renewable energy sources, diversifying its economy, and improving food production and supply chain efficiency. Additionally, implementing appropriate fiscal policies to ensure sufficient budget allocation for food support programs is crucial. However, Investing in groundwater exploration can contribute significantly to the development of Saudi agriculture and to gradually achieving food self-sufficiency.

Speed of price adjustment toward market efficiency of Indian agricultural commodity market: a market microstructure analysis of market quality

PurposeThis study examines the semi-strong market efficiency of the Indian agricultural commodity market in light of market reforms and policies. This study investigates whether the market reforms have boosted the speed of price adjustment and influenced the market quality.Design/methodology/approachThe study used the daily data of nine agricultural commodities. To precisely capture the effects of market microstructure changes, this study split the whole data into pre- and post-ban and pre- and post-reform eras. To ascertain the velocity of price adjustment, the authors used the ARMA (1,1) model, and the ADD VRatio was employed to identify the price movement on a specific day.FindingsThis study found that full incorporation of information happens sometimes. The authors noticed no gradual progress in the quickness of price adjustment. Since both methods suggested the same result for the period, the authors confirm that market microstructure changes do not enhance market quality.Research limitations/implicationsThis research has implications for academicians, policymakers and market players.Originality/valueThe paper has twofold novelty. First, this is a contemporary topic, and very few studies have been done in the Indian agriculture context. Second, the study has implications for policymakers and government because it highlights the effects of structural changes on market quality and market efficiency.

Dynamics of a Newly Established Agricultural Commodities Market: Financialization, Hedging and Portfolio Diversification in Turkey

The purpose of this study is to investigate the dynamic relationship between financial assets and agricultural commodities market in Turkey. For this purpose, first, this study investigates financialization of agricultural commodities with a newly established agricultural commodities market of Turkey. Second, this paper analyzes hedging and portfolio diversification performances of agricultural commodities. By employing the DCC-GARCH approach of Engle (2002) and spillover index approach of Diebold and Yilmaz (2014), we analyze the financialization of agricultural commodities and calculate optimal hedge ratios and portfolio weights between two classes of assets. The results show the financialization of agricultural commodities at a very early age in Turkey. There exists a low degree of comovements and volatility spillovers between financial assets and agricultural commodities. Second, we show that agricultural commodities do not hedge financial investments sufficiently but they perform very well in terms of diversification and boost portfolio performances. Considering the previous limited literature on the topic, this study contributes to the literature by displaying the dynamics of a newly established agricultural commodities market in an emerging market. The findings of this study have many important implications for farmers and producers of agricultural commodities, and financial market actors such as individual investors, hedge funds and investment banks in terms of risk management and hedging.

Ascertain the Farmers and Traders’ Willingness to Participate in E-National Agriculture Market (eNAM): Binary Logistic Regression Analysis

National Agriculture Market (e-NAM) is an electronic trading portal that networks the existing APMC markets to create a unified national market for agricultural commodities. The main aim of the study was to determine the willingness to participate in e-NAM trading by farmers and traders in Sultanpur district of Uttar Pradesh. The primary data was collected through 90 farmers and 30 traders by face-to-face interview with the help of survey schedule; this study was conducted in 2021-22, to find out the willingness, Binary Logit regression model was used. In the study the explanatory variables of farmers were social category, age of the respondent, education, produce sold to arhatiya or village traders and istance from mandi, according to analysis if education increased then willingness of farmers also increased with a coefficient of 3.27 similarly if the farmer is selling his produce to mandi arhatiya rather than a village trader then his probability to participate in e-NAM will increase by about 2.38 times. On other hand explanatory variables of Traders were social category, age of the traders, education level of traders, lending money to farmer, number of functions involved by traders in mandi and Business profits etc. All explanatory variables are significantly but only one variable which was not significantly i.e. Business profits because traders were afraid that their income will be known.

Dynamic interlinkages between geopolitical stress and agricultural commodity market: Novel findings in the wake of the Russian Ukrainian conflict

This study examines time-varying connectedness between agricultural commodities and geopolitical risk in terms of volatility. In this context, we employ the time- and frequency-based network connectedness approaches based on a time-varying parameter vector autoregression (TVP-VAR) model and use data from January 1, 2020, to January 4, 2023. Our findings indicate that (1) overall time-varying connectedness indexes are sharply amplified around geopolitical stress episodes; (2) wheat and the daily geopolitical risk index (GPRD) transmit notable volatility shocks starting in March 2022 because of the Russian invasion of Ukraine (RIU) on February 24, 2022; (3) persistent connectedness is sharply amplified around the RIU; and (4) temporary linkages dominate most of the period studied. Our findings have implications for investors, stakeholders, and policymakers in terms of their investment strategies and risk monitoring.

Assessing the Causality Relationship between the Geopolitical Risk Index and the Agricultural Commodity Markets

The aim of this study was to investigate the Granger causality between geopolitical risk (GPR) sub-indices in order to examine the implications of geopolitical risk on ten agricultural commodities classified as softs or grains. The Granger causality test was used to determine the causal relationship between the daily GPR sub-indices and the future prices of ten essential agricultural commodities from 31 March 2000 to 31 March 2022. We discovered that the GPR Threat and Act sub-indices Granger-caused changes in the wheat and oat commodity prices. These findings were also connected to the ongoing Russian–Ukrainian conflict, which has had an impact on agricultural commodity prices because both countries are major agricultural producers. The empirical results also showed how the GPR Threat sub-index Granger-affected the future prices of soybean oil, coffee, wheat, and oats. On the other hand, the GPR Act sub-index only Granger-affected the future price of oats. The findings of this study should provide useful information to both policymakers and governments to help them acknowledge the importance of geopolitical risk when setting their national policies related to food security.

AN EMPIRICAL ANALYSIS OF PRICEDISCOVERY EFFICIENCY OF THE MAIZE FUTURESMARKET IN INDIA

Purpose - The present study examines the efficacy of the maize futures market of India in forecasting future spot pricesfor April 2020-March 2022. Design/methodology/approach - In this study, Granger causality tests and the Vector Auto Regression (VAR) model are used. The initial application of the Augmented Dickey-Fuller (ADF) test was to observe the stationarity in the spot and futures price series. Findings - The findings specified that allthe variables are stationary at the point of the first difference.According to the VAR model, neither the lag value of futures nor the same spot price of maize has a substantial impact on each other. Furthermore, the Granger Causality test suggested that the futures market has an insignificant ability to predict subsequent spot prices of maize in India. Originality/value - The results of this study will be beneficial for different players namely hedgers, speculators, commodity exchanges, policymakers, researchers, etc. who have a noteworthy interest in the agricultural commoditymarkets.

A model of collusion formation and measurement in the open ascending bid auctions in the agricultural markets

PurposeThis paper gives a model of collusion formation and a method of measuring the degree of it among the traders/bidders in the agricultural commodity markets in India. The important assumption is that the bidding is repetitive with a set of common bidders. The theory has been derived based on the behavior of the wholesale market of agricultural commodities in India. The paper is based on full information in the collusion formation. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.Design/methodology/approachThe paper used the standard theory of optimization and the theory of auction and probability statistics.FindingsThis is a complete information model of cartel formation. The bidding is repetitive and continues forever in discrete time. Hence bidders behavior is observable. Using the proposed method, if the APMC measures for each market and publishes on a periodic basis, say weekly basis, then it will be easier to break the collusion in the market where relative collision is present. For example, if a farmer has three options to sell in three different markets, then the published data would help them to select the market where the degree of collusion is relatively lower. Moreover, the undesirable loss can be avoided based on the right choice of market. As a result, transaction costs will be optima.Originality/valueThe paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.

The Ethanol Market and Its Relation to the Price of Agricultural Commodities

In this article, we seek to present the synthesis of the global ethanol market in the United States (US) and Brazil by using caloric equivalence to empirically characterize the elasticity of supply and demand. We also seek to evaluate the relationship between world ethanol production and prices of agricultural commodities (wheat, rice, corn, soybeans and sugar) from 1981 to 2016 using climate-induced yield shocks as instrumental variables. The main results for the world market indicate that the production and demand for ethanol respond elastically to changes in commodity prices. The world ethanol production has no significant relationship with food prices. However, evaluation of the ethanol market and its interaction with the agricultural commodities market confirms the hypothesis that Brazilian ethanol is weakly related to the price of food.