An econometric analysis of the forward premium in the international corn market

Summary This study investigates the limkage between world macroeconomic factors and prices of an internationally traded commodity by explicitly accounting for the role of futures markets in stockholding behaviour. Using a portfolio model, the empirical analysis is carried out with quarterly data of a storable, international traded commodity—corn—for the 19731–19831 IV period. The empirical findings show that a substantial variation in the corn forward premium can be explained by current and expected future values of macroesconomic variables such as industrial production, interest rates, and exchange rates.