Determinants of the International Soybean Prices

Abstract

The commodity prices have boosted in the last years and many possible causes have been mentioned (dollar weakness, China’s economic growth, oil prices, speculative bubble, agriculture productivity declining). Despite the recent crisis, some developing countries have presented a good performance in exports of these products. In particular, we focused on the soybean prices suggesting a simple theoretical model determining the equilibrium price.

Then, using a dataset of monthly U.S. soybean prices, the exchange rate Chinese Yuan per Dollar and the Chinese real GDP from January 1981 to November 2010, we obtain a cointegration relationship supporting the theoretical model. The model and the empirical evidence suggest that the recent increase in soybean prices is mainly due to the appreciation of Chinese yuan against dollar, and the remarkable increase in the economic growth in China. Further results show that the forecasting performance of the proposed model showing that the present model is better forecasting one-month ahead than the ARIMA model. However, ARIMA model shows better performance forecasting 12-months ahead.

Keywords: cointegration, soybean prices, exchange rates, China, economic growth

JEL Classification: C32, Q11, Q17