Do Black Sea maize prices influence maize futures price discovery in Hungary? An analysis of the relationship between Hungarian and Black Sea maize prices

As the Black Sea Region (BSR) has recently emerged as a major world grain exporter region, this study assesses the possible influence of BSR maize prices on maize futures prices in Hungary. To measure the linear relationship between these prices the Pearson's correlation was used, and to estimate their cointegration the Johansen test was performed for the period April 2011 to December 2013. Prices of Paris (MATIF) and Chicago (CBOT) maize futures were also included in the analysis for comparison. The results suggest that BSR maize prices had little or no influence on futures price discovery in Hungary during the period investigated. From this it can be concluded that (a) BSR supply and demand conditions bore negligible importance for market participants, and (b) Budapest Stock Exchange maize futures may not be efficient tools for hedging price risks associated with Hungarian maize exports to third countries where prices are derived from quotes at BSR seaports. On the other hand, MATIF maize futures prices had a measurable impact on the pricing of maize futures in Hungary, although this connection disappeared for the period April-December 2013. The same was true for CBOT maize futures prices which Hungarian maize futures prices were also cointegrated with in a revised 2012/2013 crop year (April-March). Some possible causes of the dis-association of these markets observed recently are discussed.