Corn price volatility and income protection for producers

Abstract

Objective: To estimate the indicator of the risk of the future price of yellow corn #2 of the Chicago Futures Exchange in the United States to the spot price of white corn in the main white corn producing regions of Mexico through the financial volatility indicator.

Methodology: The research used the returns of the monthly time series for the period January 1998 to December 2020 corresponding to the spot price of white corn for five producer-consumer regions of Mexico and the futures price of yellow corn #2 listed on the Chicago Stock Exchange. To quantify volatility, the generalized autoregressive conditional heteroskedasticity model of order (1,1) was estimated.

Results: The volatility indicator for yellow corn turned out to be 0.9870 for the futures price of quality 2 yellow corn. In the case of the spot price of white corn in Mexico, the volatility was 0.0.7977 for the national price; 0.3385 for the central region; 0.3206 for the western region and 0.0078 for the southeastern region, respectively.

Implications: The high volatility of yellow corn #, close to unity, shows that the international market for this commodity is riskier than the national market or the regional markets in Mexico.

Conclusions: The national white corn market showed to be more risky than the western, central and southeastern regional markets, showing a higher volatility indicator.