ABSTRACT
This study shows that the weekly National Dairy Products Sales Report (NDPSR) influences dairy futures prices and reduces volatility. Our results demonstrate that volatility diminishes when a futures contract approaches expiration for all dairy commodities, including class III milk, cheese, butter, and dry whey. Dairy futures volatility is significantly correlated with pricing information released in NDPSR. Trading volume and open interest also contribute to the diminishing volatility. Macroeconomic variables, such as short-term interest rate, dollar index, futures market index, and S&P500 index do not impact dairy volatility significantly. The vector autoregression (VAR) results show no significant interdependence among dairy volatilities. Our results are robust to different models and seasonality effects.
Keywords
Dairy Futures; GARCH Volatility; NDPSR Announcements; Information Uncertainty