Volatility in Wheat Spot and Futures Markets, 1950-1993 : Government Farm Programs, Seasonality, and Causality

We explore how wheat spot and futures market volatility has been impacted by government farm programs during the 1950- 1993 period. We find that changing volatility in both markets is highly associated with changing farm programs. The mandatory allotment programs of the 1950's and early 1960's (1/3/50 - 4/10/64) were associated with low volatility, while the voluntary programs initiated in the mid 1960's seem to have induced high volatility (4/11/64 - 12/22/85). Both market-driven loan rates and conservation reserve programs appear to have helped volatility revert to lower levels since the mid 1980's (12/23/85 - 12/30/93). We also examine seasonality and causality in conjunction with the farm programs