Corn price volatility and producer income protection

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MARIO IVAN GARCÍA HERNÁNDEZ
Ramón Valdivia-Alcalá
Maria I. Osorio-Caballero
Juan Hernández-Ortiz
Miguel I. Santiago-Zárate
Cristian A. Barragán-Avilés

Keywords

futures market, autoregressive conditional heteroskedasticity, risk coverage, supply, agricultural policy.

Resumen

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Objective: To estimate the risk indicator of the future price of yellow corn #2 at the Chicago Futures Exchange (USA) regarding the spot price of white corn in the main producing regions in Mexico through the financial volatility indicator.


Methodology: The research used the returns of the monthly time series corresponding to the spot price of white corn from January 1998 to December 2020, considering five producer-consumer regions of Mexico and the future price of yellow corn #2 as listed on the Chicago Stock Exchange. To quantify volatility, the generalized autoregressive conditional heteroskedasticity model of order (1,1) was estimated.


Results: The yellow corn #2 volatility indicator was 0.9870 (future price). In the case of the spot price of white corn in Mexico, the volatility was 0.7977 for the national price, 0.3385 for the central region, 0.3206 for the western region, and 0.0078 for the southeast region.


Implications: The high volatility of yellow corn #2 (close to unity) shows that the international market for this commodity is riskier than the national market or regional markets in Mexico.


Conclusions: The national white corn market proved to be riskier than the west, center, and southeast regional markets, which have a higher volatility indicator.

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