Organic Crop Prices, or 2x Conventional Ones?

Cointegration is tested between organic and conventional corn and soybean markets in severallocations throughout the U.S. using a unique data set. Organic prices are found to behave likejump processes rather than diffusions, and Monte Carlo methods are developed to computeappropriate critical values for such tests. Findings indicate that no long-run relationship existsbetween organic and conventional prices, implying that price determination for organic corn andsoybean is independent from that for the conventional crops. This suggests that organic corn andsoybean prices are driven by demand and supply forces idiosyncratic to the organic market. Foreach crop, cointegrating spatial relationships are found between prices at the main organicmarkets. However, such relationships are generally weaker than the ones for the correspondingconventional prices, implying that organic markets are more affected by idiosyncratic shocksthan conventional markets.[...]