Trilogy for troubleshooting convergence: Manipulation, structural imbalance, and storage rates

摘要

Historically unprecedented episodes of non-convergence occurred during 2005-2010 in Chicago Board of Trade (CBOT) corn, soybean, and wheat futures contracts and Kansas City Board of Trade (KCBOT) wheat futures contracts. A trilogy of explanations has been offered to troubleshoot these episodes�manipulation, structural imbalances, and low storage rates. Theoretical and empirical analysis shows that convergence failures were generated by a disequilibrium between the higher market value of storage in the physical market for grain compared to the storage rate paid to holders of the delivery instrument for grain futures contracts. How to adjust storage rates higher in recognition of this market reality is a highly contentious issue in the grain industry.