Identifying possible misspecification in South African soybean oil futures contracts. (Special Issue: Special collection of articles on the impact of the COVID-19 pandemic on South African agriculture.)
Agrekon
; 61(1):80-93, 2022.
Article
in English
| CAB Abstracts | ID: covidwho-1778716
ABSTRACT
With the inclusion of a locally traded soybean oil futures contract, that is dual-listed and cash-settled of the Chicago Board of Trade futures contract, the South African Futures Exchange (SAFEX) aimed to provide local soybean crushing plants, the opportunity for managing their exposure toward the variation in soybean oil prices using effective hedging strategies. Which is only viable assuming adequate liquidity, that is currently lacking in these futures contracts. The soybean oil contract used for hedging local price exposure should also reflect local import parity and/or be correlated to local price movements. Therefore, with most soybean oil usually being imported from Argentina, one would expect SAFEX soybean oil futures contracts to reflect the cost of imported soybean oil from Argentina. Hence, the research study used the Engle-Granger (1987) cointegration approach, alongside a range of diagnostic tests to determine whether SAFEX soybean oil futures contracts, that is dual-listed and cash-settled of CBOT settlement values is a misspecification and whether or not SAFEX soybean oil futures contracts should rather be based on the Argentina free-on-board soybean oil prices which is a much better representation of South Africa's import parity and local industry prices.
Non-food/Non-feed Plant Products [SS200]; Structure, Ownership and Tenure [EE165]; Crop Produce [QQ050]; Agricultural Economics [EE110]; Supply, Demand and Prices [EE130]; soyabean oil; futures trading; soyabeans; contracts; plant oils; prices; settlement; Glycine max; Glycine (Fabaceae); South Africa; Argentina; Illinois; USA; Anglophone Africa; Africa; Commonwealth of Nations; high Human Development Index countries; Southern Africa; Africa South of Sahara; upper-middle income countries; Papilionoideae; Fabaceae; Fabales; eudicots; angiosperms; Spermatophyta; plants; eukaryotes; Latin America; America; South America; very high Human Development Index countries; Corn Belt States of USA; North Central States of USA; APEC countries; high income countries; North America; OECD Countries; East North Central States of USA; soybean oil; hedging; soybeans; subsaharan Africa; vegetable oils; sedentarization; United States of America
Full text:
Available
Collection:
Databases of international organizations
Database:
CAB Abstracts
Type of study:
Experimental Studies
Language:
English
Journal:
Agrekon
Year:
2022
Document Type:
Article
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