UC Davis Agricultural and Resource Economics

Aaron Smith and Colleagues Explain Why Grain Futures Contracts Fail to Accurately Price Commodities

Nov. 21, 2016

The failure of U.S. grain futures contracts to properly price commodities has spurred considerable controversy in agricultural futures markets and raised questions over the value of grain futures contracts as a useful hedging tool. Smith and his co-authors, using a dynamic econometric analysis, show that the problems are generated by the institutional structure of the delivery system, not to bubbles or irrational traders. This paper received the 2016 AAEA Quality of Research Discovery Award, and outreach publications on the topic won the 2014 AAEA Quality of Communication Award.

Garcia, P., Irwin, S. and A.D. Smith. Futures Market Failure? American Journal of Agricultural Economics, 97(1): 40-64.


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