Market Integration in the International Market of Soybeans: Are GM Soy and Non-GM Soy Markets Integrated?

This paper aims to study market integration in the international trade of soybeans from 1999 to 2019. The hypothesis is that the market remained integrated between genetically modified (GM) and non-GM soy, even after stringent regulations against GM soy in major importers starting in 1999. Using FOB prices from major exporters of GM soy (USA and Argentina) and non-GM soy (Brazil), I test for market integration with cointegration analysis and Granger causality tests. All tests show that the market between all three exporters remained integrated throughout the sample period. Furthermore, Granger causality tests show that USA remains the sole price leader. Short run elasticities for reactions to American price changes in Brazil and Argentina are 0.33 and 0.25, respectively. The results validate the Law of One Price and inform policy decisions and forecasts efforts in this valuable commodity.