McNew, Kevin

By: Karali, Berna; McNew, Kevin; Thurman, Walter N.
Wheat futures contracts failed to converge to spot prices at delivery locations in 2008–2009. By analyzing basis at nondelivery locations surrounding this episode, we study the spatial pattern of failures to converge. We find that basis fell as distance from delivery location increased and remained tightly connected to basis at the delivery location during the nonconvergence episodes. This finding is uniform throughout the delivery zone. We conclude that nonconvergence did not affect the economic relationship between delivery and nondelivery locations’ spot prices but only affected the connection between futures prices and spot prices.
By: McNew, Kevin; Smith, Vincent H.
The introduction of genetically modified grain and oilseed products at the farm level and resistance for these products by consumer groups have led to segmentation in grain markets. This study explores the implications for market price behavior for a segregated soybean market for genetically modified (GM) and non-GM varieties. A stochastic dynamic simulation model of production and storage is solved, and Monte Carlo simulation procedures are used to examine price behavior between GM and non-GM soybeans. The results suggest important differences in price behavior between GM and non-GM soybeans. The results obtained in the model simulations are compared with evidence from the Tokyo Grain Exchange, where non-GM and GM soybean futures contracts have traded simultaneously since May 2000. The evidence from the Tokyo Grain Exchange contracts is largely consistent with the results of the simulation model. Price correlations between the Tokyo Grain Exchange non-GM and GM soybean contracts tended to be similar in magnitude to those found in the simulations.
By: McNew, Kevin; Fackler, Paul L.
Cointegration methods are increasingly used to test for market efficiency and integration. The economic rationale for these tests, however, is generally unclear. Using a simple spatial equilibrium model to simulate equilibrium price behavior, it is shown that prices in a well-integrated, efficient market need not be cointegrated. Furthermore, the number of cointegrating relationships among prices is not a good indicator of the degree to which a market is integrated.