Understanding the price of DDGS

Silvestri, Jake R.

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Description

Title

Understanding the price of DDGS

Author(s)

Silvestri, Jake R.

Issue Date

2015-06-18

Director of Research (if dissertation) or Advisor (if thesis)

Irwin, Scott H.

Department of Study

Agricultural & Consumer Economics

Discipline

Agricultural & Applied Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• Vector Error Correction model (VECM)
• Forecasting
• Dried Distiller's Grains with Solubles (DDGS)
• Corn
• Soybean Meal
• Cointegration

Abstract

This thesis explores the factors that affect the price of dried distillers’ grain with solubles (DDGS) in Iowa. Past studies focused on providing a descriptive analysis of DDGS prices, risk management practices or analyzing regional DDGS price differences. Time series methods are used to investigate the presence of a cointegrating relationship between weekly DDGS prices, soybean meal prices and corn prices in Iowa. The corn and soybean meal prices used in the analysis are spot prices rather than futures prices. When seasonality in the data is controlled for, a cointegrating relationship between the three price series is found and a Vector Error Correction model (VECM). Additionally, weak exogeneity testing shows that corn is weakly exogenous. The cause of this finding may be differences in the ease of storing the three commodities. Granger causality gives insight into the direction of causality between the three price series. Impulse response functions are also included in the analysis. The VECM that is fit to the data also demonstrates value as a forecasting tool at up to four time horizons.

Graduation Semester

2015-8

Type of Resource

text

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http://hdl.handle.net/2142/87970

Copyright and License Information

Copyright 2015 Jake Silvestri

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