Commodity futures markets : dynamic interrelationships between financial asset markets, energy markets and traditional agricultural commodity markets

This doctoral thesis discerns the complicated dynamic interrelationships between financial asset markets, energy markets and traditional agricultural commodity markets. Recently, various factors have dramatically changed the economic relationships between these important markets which contributed to greater price volatility and complex price transmissions across these markets. Via the use of cointegration methodologies on stock and futures markets four price relationships have been scrutinized with respect to agricultural commodities and crude oil markets; crude oil and BRIC stock markets; crude oil, corn and ethanol markets; and Indian government sugar policy and global sugar and commodity futures indices. Crude oil futures are shown to be affecting mature commodity futures markets. Recently, policies encouraging biofuel production have changed the mechanisms of influence of crude oil futures prices on several agricultural commodity markets. It has been shown that co-movement is a dynamic concept and that some economic and policy development may change the relationship between commodities. Specifically, biofuel policy buffers the co-movement of crude oil and corn futures until the crude oil prices surpass a certain threshold. Consequently, the impact of crude oil price movements on heterogeneous BRIC economies is analyzed. Crude oil futures prices are found to have an impact on markets in two distinct manners. The first being the traditional impact of energy, being one of the main production factors, on the economies. In parallel, the information component of crude oil futures price fluctuations has an additional impact on the markets. In case of the complex relationships between crude oil, corn and ethanol futures markets, a strong relationship between crude oil and corn markets on one side, and crude oil and ethanol on the other has been found. In addition, corn futures market became more sensitive to volatility due to ethanol demand-sinks. Overall, the markets exhibit great dependency on information shifts. Consequent analysis of the Indian and global sugar and commodity indices futures offers additional insight on the bigger picture. The heterogeneous and complex Indian sugar policies, in combination of limited access and knowledge of futures markets, cause decoupling between the Indian sugar futures prices and the regional prices. Indian sugar futures markets are led by the information from global commodity markets. This division in price formation of Indian regional (spot) sugar markets and the futures markets indicates a distinct difference in the underlying price formation process. The main contributions of this research are: (i) novel use of threshold cointegration techniques to model policy interventions; (ii) inductive analytic design incorporates policy and regime changes that could affect price transmission; (iii) policy price interventions cause impaired functioning of the futures markets; and (iv) agricultural commodities and commodity markets in general are more than ever responsive to information flows and experience price and volatility spillover effects among themselves. Finally, it is hinted to reconsider futures markets theory, from the perspective that the decision-making process in futures markets is based on a priori situation or information

Is There Co-Movement of Agricultural Commodities Futures Prices and Crude Oil?

Demand and Price Analysis, Risk and Uncertainty,

Crises, crude oil and BRIC stock markets

This study complements the debate on the linkages between crude oil and BRIC stock markets. The usage of the most recent data with daily frequency within a period of two economic crises makes this study very timely and its results valuable both for researchers and investors. The main focus of this study is the impact of crude oil price on dissimilar BRIC economies. The main results indicate linear cointegration of Chinese and Brazilian stock markets with crude oil prices, whereas in case of India and Russia threshold cointegration is present. The study also shows that India’s BSE30 precedes crude oil futures, whereas China, Russia and Brazil have a bi-directional causality between the stock markets and crude oil prices

Biofuel markets, policy, and price risk management: Market efficiency of ethanol futures

Implementation of biofuels is a topic of great controversy. Nevertheless, the growth in production has been tremendous and is expected to continue its exponential trend. All indicators suggest that biofuels will become notable commodities in the near future. Current governments' energy policies have resulted in an artificially high demand. This raises the question whether futures markets might be an appropriate tool for the propagation of biofuels. This study examines market efficiency and unbiasedness of ethanol futures market. The Johansen cointegration procedure is used to test for long-run market efficiency and unbiasedness and the short-run efficieny and unbiasedness is analyzed using an error-correction model (ECM). The design of this model allows a possibility for futures markets to exhibit shor-trun pricing inefficiencies and biasedness. The results indicate that even though ethanol futures have only recently been introduced and the market is relatively thinly traded compared to other, well established commodities futures, the ethanol futures market is both efficient and unbiased in the long and short-run

Digital twins and distributed ledger technology: What can they learn from each other?

In recent times, two technology innovations have received significant attention not only from academia but also from industry and government: Digital Twins (DT) and Distributed Ledger Technology (DLT). However, it appears that the literature is predominantly focusing on either one of these new pieces of technology in depth, and there is hardly any critique or review that creates lateral connections and links between the two. This paper starts to close this gap by asking, what can DT and DLT learn from each other

The impact of the global crisis of 2008-09 on the relationship between stock markets and oil prices in the BRIC countries

Gözgör, Giray (Dogus Author)This paper examined the relationship between the equity indices in the BRIC economies and oil prices for the period from September 22,1997 to November 29,2013. We focused on various sub-periods to obtain statistically robust and economically solid relationships and to address cross-sectional dependence among stock market indices and oil prices in panel data techniques. For this purpose, we developed a test framework that made use, in a sequential order, of the second generation panel unit root test, the panel cointegration technique accounting for multiple structural breaks, the panel-Granger causality test, and the panel dynamic ordinary least square estimations to analyze the possible interactions. The results showed that there is a long-run positive relationship between the stock market indices and the oil prices only after fall 2008 in the panel framework. We analyzed the related period for each country in detail, and found that oil prices have positive effects on the equity indices in Russia, China, and India. Our findings also indicated that there is a causality relationship that runs from the oil prices to the stock markets' indices in China and India, and there is a pair-wise causality between the equity indices and the oil prices in the Russian economy

Garbage in garbage out: The precarious link between IoT and blockchain in food supply chains

The application of blockchain in food supply chains does not resolve conventional IoT data quality issues. Data on a blockchain may simply be immutable garbage. In response, this paper reports our observations and learnings from an ongoing beef supply chain project that integrates Blockchain and IoT for supply chain event tracking and beef provenance assurance and proposes two solutions for data integrity and trust in the Blockchain and IoT-enabled food supply chain. Rather than aiming for absolute truth, we explain how applying the notion of ‘common knowledge’ fundamentally changes oracle identity and data validity practices. Based on the learnings derived from leading an IoT supply chain project with a focus on beef exports from Australia to China, our findings unshackle IoT and Blockchain from being used merely to collect lag indicators of past states and liberate their potential as lead indicators of desired future states. This contributes: (a) to limit the possibility of capricious claims on IoT data performance, and; (b) to utilise mechanism design as an approach by which supply chain behaviours that increase the probability of desired future states being realised can be encouraged

Price transmission in the German sugar market

The German sugar market is governed by the European Union’s common market organization (CMO). In 2006, the CMO was subject to its first major reform. Among others, the administered price for sugar was reduced by 36%. We use a data set with monthly prices for sugar and sugar containing products to perform a cointegration analysis. Results show that the reduction of the institutional price has led to a reduction of wholesale prices and of retail prices for table sugar. Prices for sugar containing products are barely integrated with the sugar price, though. Some are found to be integrated with the CPI for food and soft drinks. In none of the cases where linear cointegration could not be detected, threshold cointegration could be found

Crude oil-corn-ethanol - nexus : a contextual approach

This paper offers a holistic study on the complex relationships between crude oil, corn and ethanol during a turbulent period between 2006 and end of 2011. Through a holistic mapping of the current market situation and a contextual analytical design we show that there exists a strong relationship between crude oil and corn markets on one side, and crude oil and ethanol on the other. However, the price relationship between corn and ethanol was revealed to be less straightforward, and is driven by the US government fuel policy. Furthermore the study indicates that corn markets have became more prone to volatility due to ethanol production, especially when the demand for corn is high and/or the crude oil prices are high enough to create a competitive market for ethanol

Blockchain Smart Contracts for Supply Chain Finance: Mapping the Innovation Potential in Australia-China Beef Supply Chains

This paper explores and demonstrates the innovation potential of blockchain and smart contracts for supply chain finance (SCF) based on cross-border beef supply chains from Australia to China. Our study adopts mechanism design and design-driven activities, and specifically employs the Agents Events Data (AED) process mapping method, which is a hybrid approach that combines Business Process Redesign (BPR) and the Resources Events Assets (REA) accounting model. The AED method consists of three sequential stages: (1) map supply chain's present state or condition; (2) introduce blockchain and smart contracts to improve supply chain processes and “traditional” SCF models; and (3) evaluate the technology and innovation impact and create new models for SCF innovation. This study identified examples of how financial risks can be mitigated or reduced with blockchain and smart contracts; and, where the credit financing itself could be fundamentally transformed. Based on this analysis, the paper's contribution is twofold: First, it proposes the group buying business model as a basis of whole-of-supply-chain finance promising new areas for SCF models that can reduce financial cost and improve cash flow performance due to greater buyer-led financing certainty and the direct involvement of buy-side demand for supply-side improvements. Second, the study demonstrates the utility of the AED process mapping as a holistic framework with fine granular levels for future empirical and fieldwork and opens up new avenues for research