Degree of Price Integration, Price Leadership Behavior and Potential Spatial Arbitrage in Corn and Soybeans Cash Markets in Ontario

摘要

The paper documents price leadership and the speed of price adjustment between each pair of cash corn and soybeans markets in Ontario, Toledo and the CBOT nearby futures, and determines whether potential price distortions may offer trading opportunities. The approach developed is applicable to the study of price transmission within a supply chain. Price integration of Ontario corn cash markets with the delivery point of Toledo and with the Chicago futures decreases in the Eastern part of the province. Corn elevators appear to be able to control the value of posted unadjusted basis over short periods of time, hence distorting the process of instantaneous price transmission. Limited trading opportunities are noted. The concentration of soybeans end-users, with only two crushers acting as end-buyers in the province, is forcing a sharper pricing by local elevators, and a more complete price integration process is observed. There is an almost instantaneous adjustment between the Chatham, London, Hensall and Norfolk markets, as well as with Chicago futures and Toledo cash markets. No trading opportunities are apparent.