Open AccessAnalysis of the Economic Potential for a Mercosur Rice Futures Market
Author(s) -
Waldemar Antônio da Rocha de Souza,
J. M. de Oliveira Filho,
Cláudio Zancan,
Alexandre Cunha Costa,
Andreza G. A. Queiróz
Publication year - 2015
Publication title -
sociedade, contabilidade e gestão
Language(s) - English
Resource type - Journals
ISSN - 1982-7342
DOI - 10.21446/scg_ufrj.v10i2.13351
Subject(s) - futures contract , commodity , economics , commodity market , agricultural economics , production (economics) , cointegration , business , financial economics , econometrics , macroeconomics , market economy , finance
World rice production reached 488.4 thousand tons, in 2012. Asian countries are the world’s largest rice producers, followed by Latinamerica, particularly Brazil, where rice is a basic food item. In spite of the clear economic benefits bestowed by commodity futures markets, neither Asia nor Mercosur have implemented a regional rice futures market. In sum, we propose to investigate the feasibility of a Brazilian rice futures contract to serve the Mercosur region by estimating Mercosur rice price dynamics and analyze basis risk and hedging effectiveness for rice market agents in the region, in a simulation framework using a hypothetical regional contract price. Sample data and period was non-probabilistic, for accessibility and convenience. Mercosur rice price dynamics expressed Argentina and Uruguay rice prices moving in synchrony. Brazil rice prices were on lower levels. Also, all three pairs of rice price series are cointegrated, with one cointegrating equation. Again, results can be largely attributed to the different price data used, in Brazil was rough rice, while in Uruguay and Argentina milled white rice with 5%. Despite that, there are preliminary evidences that a Mercosur rice futures market could be feasible.