Convenience yield acts as a negative cost (i.e., benefit) of holding a physical commodity and causes inverted markets or backwardation. The theory of storage relies on convenience yield to explain these backwardations through the ‘Working Curve,’ which has been empirically documented for storable commodities using annual stocks data. However, the intrayear dynamics of convenience yield is difficult to explore using annual inventories data. This study introduces a novel approach to analyzing convenience yield dynamics in commodity markets by leveraging sentiment analysis, enabling a more granular understanding of convenience yield dynamics in corn and soybean markets. The research questions we are trying to answer are twofold: how forward-looking and efficient is the information captured from news sentiment for storable commodity prices, and can it help explain convenience yield dynamics in these markets? We use a Global News Index to track global news attention to commodity markets. Futures prices and implied volatilities for corn and soybean are extracted from Bloomberg. The results from structural VAR show significant, immediate, and consistent negative responses in the implied volatilities to news sentiment shocks. No significant, immediate, and consistent responses are observed in convenience yield. Implied volatility tends to respond negatively by 0.5 to 1.5 percentage points to shocks in news sentiment, specifically in financial and soybean-specific news shocks. In conclusion, news sentiment does not provide forward-looking information regarding convenience yield dynamics but provides some information regarding price uncertainty 1-3 months ahead.
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