Components of Grain Futures Price Volatility

By: Karali, Berna; Thurman, Walter N.


Karali, Berna; Thurman, Walter N., Components of Grain Futures Price Volatility, Journal of Agricultural and Resource Economics, Volume 35, Issue 2, August 2010, Pages 167-182

We analyze the determinants of daily futures price volatility in corn, soybeans, wheat, and oats markets from 1986 to 2007. Combining the information from simultaneously traded contracts, a generalized least squares method is implemented that allows us to clearly distinguish among time-to-delivery effects, seasonality, calendar trend, and volatility persistence. We find strong evidence of time-to-delivery (Samuelson) effects and systematic seasonal components with volatility increasing prior to harvest times— an indirect confirmation of the theory of storage.