Price Discovery in Indian Agricultural Commodity Markets

Sehgal, Sanjay; Rajput, Namita; Dua, Rajeev Kumar

doi:10.5296/ijafr.v2i2.2224

Cited by 29 publications

(26 citation statements)

References 46 publications

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“…The results of the cointegration tests state that both markets are cointegrated for three commodities, suggesting that there is a long term relationship exists between spot and futures markets. Sanjay, Namita and Rajeev [15] examine the short run lead-lag relationship between futures and spot prices. The results of Granger causality test show that there is a bi-directional Granger lead relationships between spot and futures in all agricultural commodities except turmeric in which there is no causality exists.…”

Section: A Brief Review Of Literaturementioning

confidence: 99%

Is the Causal Nexus between Agricultural Commodity Futures and Spot Prices Asymmetric? Evidence from India

Joseph¹,

Suresh²,

Sisodia³

2015

TEL

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The present study investigates the potential asymmetric causal relationship between the Indian agricultural commodity futures and spot prices by employing asymmetric causality test [1]. The asymmetry issue in the causal relationship is vital because the impact of a negative shock might be different than the impact of a positive shock even in a situation in which the degree of the shock is the same in absolute terms. The asymmetric causality test results indicate that futures to spot price causalities are significant in all the eleven commodities under study in both positive and negative components. But the extent of causality from future to spot market is stronger in negative components as indicated by the causal parameter. The asymmetric causality from spot to futures price is significant for only two commodities, coriander and castor seeds. Overall the results indicate that agricultural futures market in India has a powerful price discovery function in all the selected commodities, which in turn indicates the efficiency of Indian agricultural commodity futures market.

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Section: A Brief Review Of Literaturementioning

confidence: 99%

Is the Causal Nexus between Agricultural Commodity Futures and Spot Prices Asymmetric? Evidence from India

Joseph¹,

Suresh²,

Sisodia³

2015

TEL

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“…Moreover, the results of research conducted on efficiency of different markets suggest conflicting findings. We find evidence of efficiency in works of A. Singh and N. P. Singh (2015), Gupta and Ravi (2013), Sehgal, Rajput, and Dua (2012), Ali and Gupta (2011), Chakrabarty and Sarkar (2010), Singh (2010), Lokare (2007), Bose (2009), Gulen (1998), etc. However, inefficiency evidence has been found in works of Inoue and Hamori (2014), Soni and Singla (2012), Easwaran and Ramasundaram (2008), Wang and Ke (2005), Mckenzie and Holt (2002), and many others, while mixed results have been found in the studies of Aulton, Ennew, and Rayner (1997), MacDonald and Taylor (1988), Wang and Ke (2005), Singh (2004), etc.…”

Section: Literature Reviewmentioning

confidence: 56%

Empirical Investigation on Food Inflation and Efficiency Issues in Indian Agri-futures Market

Singh

2017

Emerging Economy Studies

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In early 2007, the Government of India (GoI) banned futures trading on some essential agro-commodities such as wheat, rice, and two varieties of lentils due to rising food inflation. However, futures trading in agri-commodities such as chana (chickpea), soy oil, rubber, and potato were temporarily suspended. Professor Abhijit Sen’s committee, constituted to study the relationship between futures trading and agricultural commodities inflation, did not find sufficient evidence of inflationary impact of futures trading in India due to too short period of commodity futures trading. Also, an efficient futures market is required for the producers, traders, and consumers to hedge their price risk. Thus, in this study, we analyze the market efficiency of agricultural futures market and the effect of futures trading on inflation with special reference to chana (chickpea) market in India. This study is for a time frame of 10 years from 2005–2014. The data on closing prices of chana in futures and spot markets and futures trading volume has been collected from National Commodity and Derivatives Exchange, and chana wholesale price index (WPI) monthly data from Office of the Economic Adviser, GoI. The collected data is analyzed for efficiency using Johansen cointegration approach and vector error correction (VEC) restrictions and inflationary effect using Toda Yamamoto (TY) version of Granger causality test. From the results, we find that the spot and futures prices for chana are cointegrated and unbiased, that is, the chana (chickpea) futures market is efficient. But, the futures trading of chana has inflationary impact, that is, futures trading volume of chana affects chana WPI. This research has got direct implications for government and market participants. India is the largest consumer of chana (chickpea)—the third most important pulse crop produced in the world. Thus, the inflationary impact of chana futures trading is a matter of concern for GoI.

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“…This test will evaluate whether the test found is that there is an unidirectional relationship between futures and spot market which indicates the flow of information between the two markets. Analysis will use the following models as also used by Bose (2007), Sahoo and Kumar (2009), Ali and Gupta (2011) and Sehgal et al (2012). P (j)t represents spot price of coffee type j in certain period of time of t, F d(j)t represent futures price coffee type j in certain period of time of t until k and d represent delivery of coffee referring to the delivery month of contract of both Arabica and Robusta, while ε 1t , ε 2t , ε 3t dan ε 4t are mutually uncorrelated error term.…”

Section: Augmented Dickey Fuller Test (Unit Root Testing)mentioning

confidence: 99%

The Interdependence of Indonesia Coffee Futures and Spot Market and Its Relationship with Offshore Futures Market

Wulandari

Harianto

Arifin

2019

JMA

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In the Indonesia coffee premature market, it is important to confirm whether the futures market has interdependence with the spot market. Moreover, as the world largest coffee producers after Brazil, Vietnam and Colombia, it is also important to examine the interdependence between Indonesia's markets with the offshore futures market whose prices are used uses for local price determination. This study examined the granger causality relationship between Indonesia futures and spot market, and granger relationship between Indonesia and the offshore futures market using data of daily Arabica and Robusta coffee prices starting from January 2014 to June 2018. The test indicated that the futures market has a stronger ability to predict the spot market; therefore, price discovery in the futures market. Bidirectional causality relationship between Arabica offshore futures and spot market indicates market demand on Arabica coffee. In general, it's identified unidirectional granger causality relationship between local and offshore futures market with information flows from the local futures market reflects the offshore market high expectation toward crop information during harvesting period both Arabica and Robusta. This is due to the importance of Indonesia's coffee crop report to world aggregate coffee production.Abstrak: Pada pasar kopi Indonesia yang masih tergolong baru, menjadi hal penting untuk mengkonfirmasi apakah pasar berjangka memiliki ketergantungan dengan pasar spot. Selanjutnya, sebagai produsen kopi terbesar setelah setelah Brasil, Vietnam dan Kolombia, penting juga untuk mengetahui ketergantungan antara pasar Indonesia dengan pasar berjangka luar negeri yang harga kontrak berjangkanya digunakan untuk penentuan harga di dalam negeri. Penelitian ini menguji hubungan kausalitas antara pasar berjangka dan spot kopi di Indonesia serta hubungan pasar Indonesia dengan pasar kopi luar negeri menggunakan data harga harian kopi Arabika dan mulai dari Januari 2014 sampai dengan Juni 2018. Hasil uji menunjukkan bahwa pasar berjangka memiliki kemampuan yang lebih kuat dalam rangka memprediksi pasar spot sehingga pembentukan pasar terjadi di pasar berjangka. Hubungan kausalitas dua arah antara pasar berjangka luar negeri dan pasar spot Arabika menunjukkan permintaan pasar terhadap kopi Arabika. Secara umum, diketahui hubungan kausalitas dua arah antara pasar berjangka dalam negeri dan pasar berjangka luar negeri dengan aliran informasi dari pasar berjangka dalam yang menunjukkan harapan pasar luar negeri terhadap informasi panen selama masa panen baik untuk Arabika dan Robusta. Hal ini menunjukkan bahwa laporan hasil panen kopi Indonesia sangat penting bagi agregat pasar kopi dunia. Kata kunci: komoditas berjangka, kausalitas granger, volatilitas harga, pasar spot

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Price Discovery in Indian Agricultural Commodity Markets

Cited by 29 publications

References 46 publications

Is the Causal Nexus between Agricultural Commodity Futures and Spot Prices Asymmetric? Evidence from India

Is the Causal Nexus between Agricultural Commodity Futures and Spot Prices Asymmetric? Evidence from India

Empirical Investigation on Food Inflation and Efficiency Issues in Indian Agri-futures Market

The Interdependence of Indonesia Coffee Futures and Spot Market and Its Relationship with Offshore Futures Market

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