Outlook on AGRICULTURE Vol 45, No 1, 2016, pp 25–31 doi: 10.5367/oa.2016.0233 25 The impact of investors in agricultural commodity derivative markets Michele Donati, Marco Zuppiroli, Marco Riani and Giovanni Verga Abstract: The objective of this paper was to test whether investing activity in the futures markets of different commodities (grains, sugar, coffee, cotton, cocoa, livestock) could be identified as a source of the increasing level and volatility of agricultural commodity prices. The causal link between trading activity and market factors (returns, volatility) can be investigated using weekly data, usually derived from the Commitment of Traders Reports released by the US Commodity Futures Trading Commission (CFTC), or daily data expressed as the ratio of volume to open interest (VOIR). To increase the power of the estimation process and investigate the role of causal variables to determine the trends of all the market factors, the authors tested the estimates obtained by seemingly unrelated regression (SUR). One innovation is represented by the evaluation of the inverse relationships between market factors and causal variables. The market factors were also tested as causal variables, avoiding giving priority to only one part of the relationship according to Granger’s causality. The lack of significance revealed by the Granger causality test on weekly models could be due to the inappropriate frequency of the information. The ratio of volume to open interest in futures contracts performs better than other parameters extensively adopted in the literature. The likely reason is that it depends on the daily frequency of this parameter, which provides statistical evidence of phenomena that include their effect in weekly intervals. The estimations for the daily model provide statistical evidence of a mutual relationship only between trading activity and realized volatility. No causal relationships were found for returns. The behaviour of all 12 futures markets examined is quite similar and uniform with respect to the scale of the coefficients and their temporal profile. Keywords: agricultural commodity; futures markets; trading activity; volatility Michele Donati (corresponding author) is with the Department of Biosciences, Università degli Studi di Parma, Viale Usberti 33/ A, 43124 Parma, Italy. E-mail: michele.donati@unipr.it. Marco Zuppiroli, Marco Riani and Giovanni Verga are with the Department of Economics at the Università degli Studi di Parma. In recent years, commodity markets – agricultural markets in particular – have experienced high volatility with prices rising and falling sharply. The periods 2006–2008 and 2010–2011 are notable examples of when agricultural commodity prices rose to levels that created worry for countries spending a large proportion of their income on food. These anomalous fluctuations in prices also affect the stability of farm income and the level of uncertainty in farmer production decisions along the food supply chain. Future possible scenarios of similar erratic price move- ments have forced policy makers to inquire into the determinants of the spikes so that they can be prevented through appropriate regulations. In 2008, the price of important agricultural commodi- ties, such as wheat and corn, rose to a level almost four times higher than in 2007, and then halved the following