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2001•AgEcon Search (University of Minnesota, USA)Open access

SUCCESS AND FAILURE OF AGRICULTURAL FUTURES CONTRACTS

B. Wade Brorsen, N'Zue F. Fofana, Brorsen, B. Wade, Fofana, N'Zue F.

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Abstract

Most new futures contracts fail. This study estimates the effects of several factors on the success or failure of agricultural futures contracts. Commodities with futures markets and without futures markets are included. Characteristics for which no data exist, such as homogeneity, vertical integration, buyer concentration, and activeness of the cash market, are measured by the Delphi approach. An active cash market is found to be necessary for futures contract success since this variable alone perfectly predicts whether or not a commodity has a futures market.

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Most new futures contracts fail. This study estimates the effects of several factors on the success or failure of agricultural futures contracts. Commodities with futures markets and without futures markets are included. Characteristics for which no data exist, such as homogeneity, vertical integration, buyer concentration, and activeness of the cash market, are measured by the Delphi approach. An active cash market is found to be necessary for futures contract success since this variable alone perfectly predicts whether or not a commodity has a futures market.

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Available abstract

Most new futures contracts fail. This study estimates the effects of several factors on the success or failure of agricultural futures contracts. Commodities with futures markets and without futures markets are included. Characteristics for which no data exist, such as homogeneity, vertical integration, buyer concentration, and activeness of the cash market, are measured by the Delphi approach. An active cash market is found to be necessary for futures contract success since this variable alone perfectly predicts whether or not a commodity has a futures market.

Key concepts: Futures contract, Forward market, Cash, Futures market, Hedge, Economics, Spread trade, Financial economics

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