Intermarket spread opportunities between Canadian and American agricultural futures

This study extends Carter's (1989) study of the efficiency of Canadian canola and American soybean oil futures markets during 1981–1987 to a new period (1988–1993). It also uses a different spread strategy than Carter to see if the same conclusions hold for canola and soybean as well as Canadian feed wheat and American wheat futures. Our findings confirm that in the 1981–1987 period there were no opportunities for intermarket spread profit between canola and soybean oil futures and between feed wheat and wheat futures. Our findings for the period 1988–1993, however, suggest there were some opportunities for such profits. Thus, it was possible for floor traders (and possibly institutional investors), who paid low transaction costs, to experience some additional profits. We also find that these opportunities are neither due to changes in currency values over time, nor to the use of weekly or daily exchange rates. Nevertheless, nonparametric tests show that spread profits are statistically insignificant.