Date of Graduation

8-2024

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor/Mentor

McKenzie, Andrew M.

Committee Member

Durand-Morat, Alvaro

Second Committee Member

Thompson, Jada

Keywords

Futures market; Hedging effectiveness.; Price dynamics; Rice; Risk management

Abstract

The ASEAN (Association of Southeast Nations) region is the world's leading rice producer, yet the region lacks a dedicated rice futures market. In contrast other world grain markets are served by liquid futures contracts, which aid producers through price discovery and risk management. This glaring gap raises a critical question: Can an ASEAN rice futures market be established to unlock the potential economic benefits for the region's rice sector? By predicting ASEAN rice pricing features and analyzing the efficacy of hedging for regional rice market players, this study explores the viability of an ASEAN rice futures contract to service the ASEAN area. The study used a simulation architecture using the Thai 5% FOB rice price as a hypothetical futures contract price and prices from two other key ASEAN rice exporting and importing countries (Vietnam and Philippines) sourced from FAO GIEWS. A strong correlation between the hypothetical Thai 5% futures price and the other major ASEAN prices is a prerequisite for the success of a futures contract, which might be utilized as a risk management/hedging tool. Results show that Thai 5%, Vietnam 5%, and Philippines national average prices are highly correlated, indicating a futures contract based on Thai 5% rice has the potential to aid in risk management for Vietnamese exporters and Philippine importers. In addition, we identify a number of institutional and political challenges that would currently prevent the formulation of an ASEAN rice futures contract. Due to the absence of seasonality on the Thai5% price series, it does not make an attractive endeavor to basis trade; a necessary condition to attract more domestic market participants to enhance liquidity in the market. This analysis contributes significantly to ongoing discussions about regional agricultural cooperation and financialization efforts within ASEAN.

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