Futures market dominates European wheat prices, but falters in volatility spikes.
The article examines how prices are determined in the European wheat market. By using a method called partial cointegration combined with state space modeling, the researchers found that the futures market plays a bigger role in setting prices efficiently. However, during times of high price volatility, this dominance decreases. The study also discovered that long-term relationships between spot and futures prices are affected by factors like wheat quality variations and changes in futures prices.