Price transmission of US soybean futures into Italian spot market

Among all the risk connected with the agricultural sector, price risk management (PRM) is becoming more and more important to Italian and European farmers. With the gradual abandoning of price support policies, the volatility of international prices has been gradually transferred to EU farmers. For long time, US farmers have been able to hedge price risk by operating in domestic commodity financial markets, while Italian farmers cannot benefit from a national futures market. This paper analyses price transmission of Chicago futures prices (CBOT) on Italian spot prices. Among different models, the statistical properties of the series involved allow us to estimate a restricted error correction model. Results highlighted the existence of a significant connection between the two markets, supporting the hypothesis that an effective hedging strategy for soybean Italian producer could be applied operating on the CBOT futures market.