Could Exist a Causality Between the Most Traded Commodities and Futures Commodity Prices in the Agricultural Market?

Michal ČermákMarie Ligocká

DOI 10.7160/aol.2022.140402
No 4/2022, December
pp. 11-25

Čermák, M. and Ligocká, M. (2022) "Could Exist a Causality Between the Most Traded Commodities and Futures Commodity Prices in the Agricultural Market?", AGRIS on-line Papers in Economics and Informatics, Vol. 14, No. 4, pp. 11-25. ISSN 1804-1930. DOI 10.7160/aol.2022.140402.

Abstract

Nowadays, many financial and academic practitioners explore the area of high-frequency forecasting in new dimensions. Research on agricultural commodities is an important issue for food policy and security. This paper is focused on the causality between the spot prices and futures prices of the main traded agricultural commodities. Thus, the Granger causality was used to identify the relationship between spot and futures prices of commodities. Our results show the Granger causality between cash prices and futures prices of wheat and cocoa. However, there is also causality in the opposite direction in the case of wheat. Causality could be related, among other things, to a specific market position of the commodity, food policy, historical aspects, the sensitivity of the market, speculation activity, tax policy, and particular interconnection of the market with the energy commodities market. In the price process of cash and futures wheat prices, inventories and storage play an important role.

Keywords

Agricultural commodity, Granger causality, commodity futures, cash price, agricultural commodity interdependence, food policy.

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