Globally Distributed Production and the Pricing of CME Commodity Futures


  • Nicolas Merener

    Corresponding author
    1. Nicolas Merener is at Business School, Universidad Torcuato Di Tella, Argentina., I thank the Editor (Robert Webb), and an anonymous but very thoughtful referee whose comments greatly improved the paper. I also thank Cris Llerena for superb research assistance. I received helpful comments from Hildegart Ahumada, Leandro Arozamena, Juan Jose Cruces, Jose Martinez, Andy Neumeyer, Guido Sandleris, Nicholas Trachter, Gustavo Vulcano, attendees at BM&F Bovespa CGRCC 2011, and seminar participants at Renmin University, Tsinghua University, HEC Montreal, UC Berkeley, Concordia University, and the JP Morgan Commodities Center at UC Denver. All remaining errors are mine.
    • Business School, Universidad Torcuato Di Tella, 1010 Saenz Valiente, Buenos Aires 1428, Argentina. Tel: +54-11-5169-7326, Fax: 54-11-5169-7347, e-mail:

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I investigate how local supply shocks in the globally distributed production of commodities are incorporated into Chicago Mercantile Exchange (CME) futures prices. I exploit that the soybean market share of the United States (Argentina) decreased (increased) between 1996 and 2010, and use rain, which tends to increase output, as a source of exogenous supply shocks. I find a significantly negative response of CME soybean prices to daily rain across regions and time. Moreover, the impact of local rain on the CME price is approximately linear in the time-varying local share of global output. Therefore, traders of CME contracts seem to aggregate supply in a globally integrated manner and are exposed to globally distributed shocks. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 35:1–30, 2015