Price Transmission Analysis of the International Soybean Market in a Trade War Context

Abstract

This study analysed the dynamics of the international soybean market using econometric techniques and economic models to study the impacts of the US–China trade war. It considered the analysis of "spatial" (horizontal) price transmission during an approximately ten-year period from September 2009 to May 2019 using monthly time-series data. The research focused on the leaders in the international soybean market, namely, China, the USA, the EU, Brazil and Argentina. Several econometric techniques were employed. The stationarity of the price time series was determined using the augmented Dickey–Fuller (ADF) unit root test. Structural breaks were inferred using the ADF test with a breaks test and a Bai–Perron multiple break test. The long-term relation/cointegration amongst the series was determined using the Johansen cointegration test (1988), with the previous breaks input as dummy variables. The direction of the causality was inferred using the Granger causality test (1969). The long-term and short-term causal relations were determined using the vector autoregression model (VAR) and the vector error correction model (VECM). The results showed a highly efficient and cointegrated market. The incidents of the trade war, as represented by tariffs and subsidies, had minor effects on the market efficacy, cointegration and price transmission. The arbitrage process of the studied market managed to get around the tariffs. In other words, there was no empirical evidence to support the claim that the law of one price (LOOP) did not hold.

El presente estudio analiza las dinámicas del mercado internacional de soja bajo el contexto de la guerra comercial EE.UU.-China, para el período septiembre 2009-mayo 2019, con datos mensuales de los mercados de Chicago, Rotterdam, Paranaguá, Rosario y China (Spot y Dalian). Mediante pruebas ADF con quiebres estructurales (Bai-Perron), cointegración de Johansen, causalidad de Granger y modelos VAR/VECM, se confirma un mercado altamente eficiente y cointegrado. Los aranceles de la guerra comercial generaron un único quiebre estructural en el mercado de Dalian en febrero 2018, con una dislocación temporal de precios de ~4.5 meses resuelta por arbitraje. Chicago continúa siendo el líder de precios, mientras que el mercado brasileño de Paranaguá emergió como nuevo referente, y Uruguay es validado como precio-aceptante dentro de un sistema cointegrado globalmente.