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$25 spring wheat was a bubble, right?

Xiaoli Liao Etienne (Division of Resource Management, West Virginia University, Morgantown, West Virginia, USA)
Scott H. Irwin (Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, Urbana, Illinois, USA)
Philip Garcia (Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, Urbana, Illinois, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 5 May 2015




The purpose of this paper is to test for bubbles in the US hard red spring (HRS) wheat market from 2004 to 2014, with particular focus on 2007-2008 when the market experienced record-high price volatility.


The authors apply a recently developed bubble testing procedure to cash, rolling nearby futures contract, and individual futures contract prices of HRS wheat sampled at daily, weekly, and monthly frequencies. Two critical value (CV) sequences are derived to date-stamp bubbles, one from Monte Carlo simulations, and the other from recursive wild bootstrap procedure.


The authors find that regardless of the price series adopted, sampling frequency chosen, or CVs used, bubbles account for only a small fraction of the HRS wheat price behavior during 2004-2014. However, much sharper differences are detected regarding the key policy question of bubble behavior during 2007-2008. Individual futures contract prices during this period suggest only a minimal number of bubble days, while rolling nearby futures and cash prices indicate bubbles lasting much longer. Since theory suggests that prices for individual futures contracts are more likely to provide a clearer test of bubble components, the authors conclude there is little evidence that the spike in spring wheat prices to $25 per bushel in 2007-2008 was a bubble.


This paper is the first in the literature to examine the sensitivity of bubble testing to different types of data, sampling frequencies, and inference procedures.



Etienne, X.L., Irwin, S.H. and Garcia, P. (2015), "$25 spring wheat was a bubble, right?", Agricultural Finance Review, Vol. 75 No. 1, pp. 114-132.



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