The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?

Posted: 22 Feb 2010

See all articles by Dwight R. Sanders

Dwight R. Sanders

Southern Illinois University at Carbondale - Agribusiness Economics

Scott H. Irwin

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Robert P. Merrin

Universidad de Cantabria

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2010

Abstract

This paper revisits the “adequacy of speculation” debate in agricultural futures markets using the positions held by index funds in the Commitment of Traders reports. Index fund positions were a relatively stable percentage of total open interest from 2006-2008. Traditional speculative measures do not show any material shifts over the sample period. Even after adjusting speculative indices for commodity index fund positions, values are within the historical ranges reported in prior research. One implication is that long-only index funds may be beneficial in markets traditionally dominated by short hedging.

Keywords: Commitment of Traders, index funds, commodity futures markets, G13, Q11, Q13

Suggested Citation

Sanders, Dwight R. and Irwin, Scott H. and Merrin, Robert Patrick, The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing? (Spring 2010). Applied Economic Perspectives and Policy, Vol. 32, Issue 1, pp. 77-94, 2010. Available at SSRN: https://ssrn.com/abstract=1556176 or http://dx.doi.org/ppp006

Dwight R. Sanders (Contact Author)

Southern Illinois University at Carbondale - Agribusiness Economics ( email )

Carbondale, IL 62901-4515
United States
618-453-1711 (Phone)

Scott H. Irwin

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
326 Mumford Hall, MC-710
Urbana, IL 61801
United States

Robert Patrick Merrin

Universidad de Cantabria ( email )

Santander 39005
Spain

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