Globally Distributed Production and the Pricing of CME Commodity Futures

<section xml:id="fut21642-sec-0001"> I investigate how local supply shocks in the globally distributed production of commodities are incorporated into Chicago Mercantile Exchange (CME) futures prices. I exploit that the soybean market share of the United States (Argentina) decreased (increased) between 1996 and 2010, and use rain, which tends to increase output, as a source of exogenous supply shocks. I find a significantly negative response of CME soybean prices to daily rain across regions and time. Moreover, the impact of local rain on the CME price is approximately linear in the time‐varying local share of global output. Therefore, traders of CME contracts seem to aggregate supply in a globally integrated manner and are exposed to globally distributed shocks. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 35:1–30, 2015 </section>