Spatial Competition, Arbitrage, and Risk in U.S. Soybeans

Abstract

This paper analyzes spatial arbitrage and vertical integration of a U.S. soybean-trading firm. A risk-constrained optimization model using Monte Carlo simulation and copula joint distributions is specified. Results show that spatial-arbitrage payoffs vary regionally. Sensitivity results indicate that payoffs and risks increase as firms become more vertically integrated.

Keywords

• agricultural subsidies
• crop insurance premiums
• farmer welfare
• risk management agency