Date of Graduation

5-2026

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor/Mentor

Mckenzie, Andrew

Committee Member

Anderson, Andrew

Second Committee Member

Yang, Yao

Keywords

Commodity Markets; Cotton; Price Discovery

Abstract

Price discovery in agricultural futures markets is augmented by information about supply and demand, leading markets to react when public reports are released. Effective price discovery in futures markets is vital to allocate physical commodities across time, synthesize information, and provide hedging tools. Price discovery in cotton markets is unique because it is less liquid than many other commodity markets. Therefore, our objective is to measure the initial price response in the cotton futures market to unanticipated ending stocks information in the WASDE report; then determine if markets continue to adjust after the initial price change. To meet our objective, we employ an event study using intra-day cotton futures prices, USDA estimates of U.S. and world ending stocks, and private forecasts released prior to the government report. Preliminary results show that prices initially overreact upon release of the WASDE, then move back toward the pre-report price. Conversely, previous research indicates more liquid contracts adjust quickly and without overreaction. Our results help determine whether price discovery in less liquid markets is as efficient and whether such markets tend to over or underreact to news. Results have implications that may influence policymakers and market participants in terms of speculative and hedging strategies. Overall, the results determine that cotton futures market tend to overreact to WASDE report releases, initially having a negative shock and having a slow recovery to new equilibrium.

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