Relationship between Futures and Spot Market for Selected Spices in India

We examine the relationship between spot and futures prices for selected five agricultural commodities, namely, Chilli, Coriander, Jeera, Pepper and Turmeric. We considered all the contracts of the above commodities over a period of 36 months, from Jan 2008 to Dec 2010. The study examined the existence of unit root in the data series by employing Augmented Dickey-Fuller (ADF) test and we found the existence of long run relationship between selected spot and futures market using Johansen cointegration test and the presence of disequilibrium between markets in short run by employing Vector Error Correction Model (VECM)