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The impact of Brazil on global grain dynamics: A study on cross‐market volatility spillovers
Author(s) -
Avileis Felipe G.,
Mallory Mindy L.
Publication year - 2022
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12693
Subject(s) - volatility (finance) , cropping , economics , spillover effect , agricultural economics , multiple cropping , agriculture , geography , financial economics , macroeconomics , archaeology
Brazil's rise as a global powerhouse producer of soybeans and corn over the past 15 years has fundamentally changed global markets in these commodities. Brazil's rise is arguably due to the development of varieties of soybean and corn adapted to climates within Brazil, allowing farmers to double‐crop corn after soybeans in the same year. Corn and soybean market participants increasingly look to Brazil for fundamental price information, and studies have shown that the two markets have become cointegrated. However little is known about how much volatility from each market spills over to the other. In this article, we measure volatility spillover ratios between U.S. and Brazilian first crop corn, second‐crop corn, and soybeans. We find that linkages between the two countries increased after double‐cropping corn after soybeans expanded, volatility spillover magnitudes expanded, and the direction of volatility spillovers flipped from U.S. volatility spilling over to Brazil before double cropping, to Brazil spilling over to U.S. after double cropping.