Soft Commodities Research Articles

Relationships between Soft Commodities, the FTSE/JSE Top 40 Index and the South African Rand

Abstract The relationships between seven soft agricultural commodities, namely cocoa, coffee, corn, cotton, soyabean, sugar and wheat; and the FTSE/JSE Top 40 Index will be investigated. The relationship between the seven commodities and the FTSE/JSE Top 40 Index against the South African Rand (versus the United States Dollar) will also be investigated to determine the impact of the variables on the ZAR. The analysis of the variables will include correlation, regression, vector autoregression and the Johansen cointegration test to determine linear interdependencies among the variables. The results indicate that there is a cointegrating relationship between the both relationships investigated.

Commodity futures and market efficiency

We analyze the market efficiency of 25 commodity futures across various groups—metals, energies, soft commodities, grains and other agricultural commodities. To do so, we utilize the recently proposed Efficiency Index to find out that the most efficient among all of the analyzed commodities is heating oil, closely followed by WTI crude oil, cotton, wheat, and coffee. On the other end of the ranking scale we find live cattle and feeder cattle. The efficiency is also found to be characteristic for specific groups of commodities, with energy commodities being the most efficient and other agricultural commodities (composed mainly of livestock) the least efficient groups. We also discuss contributions of long-term memory, fractal dimension and approximate entropy to the total inefficiency. Last but not least, we come across the nonstandard relationship between the fractal dimension and the Hurst exponent. For the analyzed dataset, the relationship between these two variables is positive, meaning that local persistence (trending) is connected to global anti-persistence. We attribute this behavior to specifics of commodity futures: they may be predictable over a short term and locally, but over a long term they return to their fundamental prices.

Measuring spill-over effects of foreign markets on the JSE before, during and after international financial crises

There is a large body of research that proves the co-movement of international stock markets over time. This co-movement manifests through various instruments ranging from stocks and bonds, to soft commodities and can be visualised as returns and volatility spill-over effects. During the most recent financial crisis, it was once again highlighted that no market is immune to spill-over effects from other international markets. By employing an aggregate-shock (AS) model, returns and volatility spill-over effects of the Hang Seng, London, Paris, Frankfurt and New York stock markets to the JSE are confirmed. The findings also confirm the JSE All share index is directly affected through contagion by the returns of the economic area where the crisis originates. However, the results further confirm that South Africa has progressed in shielding its stock market against financial crises in recent times. These findings hold important implications for stock portfolio managers in South Africa.

Do Commodity Index Traders Destabilize Agricultural Futures Prices?

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the intensive investment activities of commodity index traders(CITs) have destabilized agricultural futures markets. Using a stochastic volatility model, we treat conditional volatility as an unobserved component, and analyze whether it has been affected by the expected and unexpected open interest of CITs. However, with respect to twelve increasingly financialized grain, livestock, and soft commodities, we do not find robust evidence that this is the case. We thus conclude that justifying a tighter regulation of CITs by blaming them for more volatile agricultural futures markets appears to be unwarranted.

Le Borse Delle Merci [Commodity Exchanges

The article gives an overview of major commodity exchanges and exchanged products. Soft commodities, agriculturals, and hard commodities such as industrial and precious metals, are covered. The importance of quality and quantity standardizations is discussed, together with the differentiation between spot and forward markets, the latter in the double dimension of physical and derivatives markets, including Futures and Options. Price volatility gives opportunity for hedging and speculating on commodity exchanges and this article explains how this is achieved.A section is devoted to exchanges specialized in energy products, i.e. crude oil, refined oil products, natural gas and electricity. Finally, main new trends are presented, including electronic marketplaces, new financial products, emission trading and a detailed explanation of weather derivatives.

Returns to Traders and Existences of a Risk Premium of a Risk Premium in Agricultural Futures Markets

The purpose of the study is to examine the existence of a risk premium in futures markets to determine if hedgers pay speculators for protection against adverse price movements. Hartzmark (1987) addressed this same question but his time period of study from 1977 to 1981 is limited and outdated. The current state of the futures markets is quite different today than in was in the late 1970s. The data for this study extends from January 2000 to September 2009 and covers 12 commodity markets. The profitability of aggregate trader groups is calculated using end of day positions and prices for individual commodities; these commodities are then grouped according to price patterns over the sample period into three groups including grains (corn, soybeans, soybean oil, and wheat contracts), livestock (feeder cattle, lean hogs, and live cattle) in addition to cotton, and soft commodities (cocoa, coffee, and sugar). More importantly, long passive traders, called commodity index traders (CITs) emerged into the futures markets during 2004 and 2005 and provide a natural experiment to determine if naively holding positions opposite of hedgers results in positive profits and thereby evidence of a risk premium. Results do not find convincing evidence of the existence of a positive risk premium.

SOFT COMMODITIES: Robust Demand

Africa Research Bulletin: Economic, Financial and Technical SeriesVolume 46, Issue 12 p. 18532B-18533A SOFT COMMODITIES: Robust Demand First published: 09 February 2010 https://doi.org/10.1111/j.1467-6346.2010.03041.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume46, Issue12February 2010Pages 18532B-18533A RelatedInformation

Gezähmter Dschungel - industrialisierte Agrarwirtschaft - romantisierter Landloser

Regardless of what the actuality of Brazil's role as a global soft commodities supplier may be, the importance of the agrarian sector in the country's economic structure has declined continuously in the last 100 years (GDP, employees). The increase in industrialization and urbanization was accompanied by deagrarianization. This left capital-intensive agribusiness enterprises producing for the global market and also left agricultural workers, who are only successful sporadically with demands for their own land. Simultaneously, rural communities and customs gained more and more importance culturally. In the 1920s, a search began for Brazil's own roots in these ruralities. Urban elites tried to compensate for the loss of rural lifestyle by romanticizing the rain forests, indigenous people, {! Gaúchos}, {! Sertanejos} and the landless. In this way they intended to calm and musealize them. The diversity of Brazil made the mysticizing of a standardized figure such as the {! Gaucho} (Argentina), {! Cowboy} (USA), {! Campesino} (Mexico) or {! Bauer} (Germany) difficult.

Execution edge of pit traders and intraday price ranges of soft commodities

Intraday activity of open outcry pit traders and mechanics of price formation are important for short-term traders, money managers and regulatory bodies. In particular, congestions of stop-loss and limit orders, as well as subsequent highs/lows of the daily prices are among the most important features traders are interested in. We present a comparison of range-based and close-to-open volatility estimators for US-traded soft physical commodities. The comparison indicates that pit traders are able to identify the congestions of pre-placed stop orders, reach them and liquidate on them, or let the prices run. The comparison also suggests a substantial execution edge of soft commodities pit traders compared to currencies traders.

Erratum

Interdependencies between commodity prices can arise from the impact of changing macroeconomic variables, from complementarities or substitutabilities between commodities, or from common responses by speculators. Malliaris and Urrutia (1996) found significant linkages between rollover prices of six related agricultural commodities on the Chicago Board of Trade. This article examines interdependencies between futures prices for soft commodities traded on the London International Financial Futures Exchange (LIFFE), calculated using Clark indices. Results show that there are no interdependencies between any two prices; price discovery of one contract provides no information about others. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22: 269–280, 2002

Foreign currency exposure and the hedging possibilities for pension funds

Notes increasing investment by US pension funds in foreign currency denominated assets and briefly outlines previous research on the links between various types of assets/currencies. Uses cointegration methodologies on 1978‐1996 futures data for commodities and four currencies (Swiss, German, British and Canadian) to assess the long‐run stochastic relationships between them; and suggests that currencies are more closely cointegrated with soft commodities and precious metals than with livestock. Considers the implications for hedging and diversification by pension fund managers trying to manage risk.

Price instability and commodity futures markets

The inability of individual developing nations to provide widescale commodity price support and the continual renegotiation of international commodity agreements have engendered a search for alternative mechanisms to reduce price volatility for soft commodities. One possibility is the use of futures markets. This paper takes four commodities, cocoa, coffee, sugar and wheat and analyzes the efficiency of associated futures markets in terms of price discovery and risk reduction. In essence, all four markets exhibit efficiency and therefore provide, in theory, a viable policy alternative for developing economies.