Canary in the Coal Mine: COVID-19 and Soybean Futures Market Liquidity

Kun Peng, Zhepeng Hu, Michel A. Robe, Michael Adjemian

Research output: Working paper


We document the impact of the early stages of the COVID-19 pandemic on liquidity in U.S. agricultural markets. Soybean futures liquidity is affected the earliest, the most, and the longest. Soybean depth drops by half for outright futures and by over nine tenths for calendar spreads, and soybean bid-ask spreads increase significantly, starting on the night of February 12 to 13, 2020—a full two weeks before (i) liquidity evaporates in U.S. bond and equity markets and (ii) soybean prices start to fall sharply. The timing of the soybean liquidity drop coincides with overnight news of bleak COVID-19 developments in China (a key source of world demand for oilseeds). Following a series of emergency interventions by the U.S. Federal Reserve, liquidity recovers in the outright market—but depth remains abnormally low for calendar spreads. These patterns cannot be explained by other factors, such as changes in soybean futures trading volume or price volatility: the COVID-19 shock was novel, and it destroyed soybean-market liquidity in a way that foretold financial-market developments two weeks later. In contrast to soybeans, we find little evidence of a drop in corn or wheat futures liquidity until U.S. financial and crude oil markets sink in early March. Soybeans were truly the canary in the coal mine.
Original languageEnglish (US)
Number of pages50
StatePublished - Feb 10 2021


  • COVID-19
  • Financial market liquidity
  • Agricultural commodities
  • China
  • Precursor


Dive into the research topics of 'Canary in the Coal Mine: COVID-19 and Soybean Futures Market Liquidity'. Together they form a unique fingerprint.

Cite this