Although both CBOT and TGE com futures prices are non-stationary in levels, Johansen cointegration test shows that the two series are cointegrated, suggesting that there exists a long-run equilibrium relationship between CBOT and TGE com futures. In addition, a Granger causality test shows the evidence of a long-run causal relationship between CBOT and TGE corn futures prices. In the short run, the CBOT com futures have a strong causal effect on the TGE com futures, whereas e TGE com futures ye a rather we causal effect on the CBOT com futures. A bivariate GARCH model (BEKK model) was estimated to examine the volatility spillover effects. There exists a feedback between the CBOT and TGE volatilities. The two markets trading the same commodity are well linked as expected.
Korea relies more than 70 percent of food supply on a limited number of exporting counties. If the suppliers possess market power, the food security matters. This study tested whether the major exporting countries of corn and wheat have power of determining market prices and enjoy oligopolistic profit in Korea. The empirical results indicate that Korea shows a high degree of import loyalty toward U.S. products. It is evident that the U.S. and Australia have market power in the wheat market, while no distinct power is detected in the com market. The result for the corn market seems to reflect the severe price competition between the two major exporters, the U.S. and China. It is also shown that the launch of the WTO does not significantly change the structure of market power in the markets considered. The results of this study suggest that it is important to diversify import sources and to use futures contracts and long-term agreements to enhance food security.
This study testsd if the Yangae Agricultural Wholesale and Distribution Center provides higher and more stable prices to producers than the Garak wholesale market as promised. The empirical results do not show any strong evidence that the Yangae prices are consistently higher and stabler than the Garak prices. Even the law of one price does not hold except for only one out of seven commodities examined. However, it is evident from the Granger causality test that the Yangae prices tend to influence the Garak prices to some extent, which can be regarded as a positive effect of the newly introduced marketing system. It is still needed, however, to improve the pricing mechanism for the Yangae Agricultural Wholesale and Distribution Center.
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