Cointegration Analysis of the World’s Sugar Market: The Existence of the Long-term Equilibrium

Abstract

This paper addresses the issue of interconnection among major sugar markets and commodity/exchange stocks in different parts of the world using the Johansen cointegration approach and vector error correction model. Due to a high degree of sugar market fragmentation and corresponding diversity in price levels and its volatility in different regions, the results of our analysis sheds some light on the very fact of a ‘single’ global sugar market existence and can be important not just with regard to producers and buyers of sugar but for the international investors as well, both in the light of risk governance and maximizing profitability. Using the evaluation of the extent of connection among regional sugar markets, one can assess potential benefits available to investors through international diversification between the analyzed markets. Our analysis has revealed the presence of mutual interaction among the selected sugar markets/commodity stock exchanges in individual regions and confirmed the long-term equilibrium among them. Therefore, despite an obvious diversity in price level and their fluctuations in different world regions, the selected for the analysis regional sugar markets are acting together as a single organism. The determining of the extent to which the analyzed sugar markets are interconnected have significantly strengthen the understanding of the latest sugar price developmental trends. In addition, the results of this study opened space and mapped out clear objectives and measurable targets for potential research – to reveal what markets can be referred to as leading ones in a sense that namely they primarily serve as a source of price turbulence. In summary, our results revealed and confirmed the long-term equilibrium among them and the outcomes of this study opened the new research realms and identified the clear and measurable targets for the future empirical research in this field.

Sugar Prices vs. Financial Market Uncertainty in the Time of Crisis: Does COVID-19 Induce Structural Changes in the Relationship?

“…As an important agricultural and food commodity, sugar is highly integrated into many developing and less developed economies. As regional sugar markers create a single price organism [38], unpleasant events on one market can affect global price. Today, highly volatile sugar prices not only have global significance, but determine many individuals' livelihoods.…”

“…The global sugar market is highly fragmented, and price levels and volatility differ across various national markets, mainly due to governmental protectionist measures. However, Kuzmenko et al [38] revealed mutual interaction between selected stock exchanges and confirmed long-term equilibrium. Global sugar prices are recognised as highly volatile [40]; the volatility stems from the economic and physical characteristics of the sugar markets [41,42], as well as various support measures that benefit the subsector [43].…”

“…We investigate the relationship between financial market uncertainty and commodity prices on the example of sugar. The world sugar market is one of the most rapidly developing [38], oscillating between surpluses and deficits [39]. The global sugar market is highly fragmented, and price levels and volatility differ across various national markets, mainly due to governmental protectionist measures.…”

Investigating the Dynamic Relationship Between Social Distancing Restrictions and the Adoption of Mobile Money Services in the Middle East: A Panel Data Analysis

“…Since the kurtosis values for Y, X4 and X5 were below 3, which indicates platykurtic distributions, regarding the Jarque–Bera test, the p -value for all variables is below 5%, and hence the null hypothesis of the normal distribution is rejected. Kuzmenko et al (2020, p. 33) have stated that ‘The non-normal distribution is problem if we want to apply t -tests, to calculate the confidence intervals or to make predictions.’ Since the scope of this study does not include prediction, the non-normal distribution is not an issue in our study.…”