The relationship between pecan price and cold storage inventories: a seasonal cointegration approach

Little is known about the behavior of shelled pecan prices and the pivotal role the sheller plays in the pecan industry. Available literature on pecans is mostly concentrated on pecan growers and the prices they receive. Although agricultural data are known to have some form of seasonality, economists frequently model by assuming seasonality to be approximately constant. This dissertation employs an alternative approach to examine the time series behavior between shelled pecan prices and inventories, at both the zero and seasonal frequencies, using a seasonal cointegration technique. The study employs both seasonally unadjusted and adjusted quarterly data (1991-2002). Results suggest that, first, pecan cold storage inventories and shelled pecan prices are seasonally integrated. Second, shelled pecan prices and pecan cold storage inventories (shelled only or total) are seasonally cointegrated only at the biannual frequency when unadjusted data are used. Finally, the speeds of adjustment are greater than one implying rapid adjustment to any short-term seasonal deviation in cold storage inventories.