Empirical Research Based On Effect Of Weather On China’s Agricultural Futures Markets

This paper mainly studies the effect of weather on China’s agricultural futures market. With the emergence and development of the Chinese market economy system, our country has cancelled the purchase and sale policy of agricultural products and deregulated most of the price of agricultural products, which promoted the generation and rapid development of China’s futures market. Because of agricultural products’ characteristics, agricultural products have become China’s first commodity for futures trading. To date, agricultural futures are still important trading varieties in China’s futures market. The frequency of extreme weather events has increased with the occurrence of global warming in recent years, which has a certain influence on global economy. The growth of agricultural products is closely related to weather, so the phenomenon of price abnormal fluctuations often happened. This article aims to discovery effect of weather on China’s agricultural futures market and put forward relevant suggestions and measures for agricultural futures market to avoid effect of extreme weather. The closing prices of soybean are sampled from March 15-th 2002 to December 31-st 2014, whereas the prices of corn are selected from September 23-rd 2004 to December 31-st 2014. We consider the weather data (average temperature, average relative humidity, and sunshine duration) of capital cities as representative. We apply DCCA cross-correlation coefficient, asymmetric DCCA cross-correlation coefficient, multifractal detrending cross-correlation analysis(MF-DCCA) method and asymmetric multifractal detrending cross-correlation analysis(MF-ADCCA) method to study the effect of weather’ on China’s agricultural futures market.Based on the whole correlation between weather and agricultural futures market, we can concluded that under certain conditions, relationships between weather and agricultural futures market are significant, where the effect of temperature on agricultural futures market is more significant. Extreme weather has not affected returns of soybean and corn much, except that the yield rate of soybeans is subject to extreme temperatures. The degree of multifractal further illustrates cross correlation between temperature variable and soybeans return is related to small fluctuations (i.e. the extreme weather).Then, based on the asymmetric correlation between weather and agricultural futures market, we also concluded that cross-correlations between weather conditions and the agricultural futures market are asymmetric. Under certain conditions, relationships between weather and agricultural futures market are significant, but most situations are not significant. When agricultural futures market is bear market (i.e. decline trend), extreme temperatures affect soybeans futures market, but under the other circumstances extreme weather is almost no effect on yield of agricultural futures markets. From the multifractal characteristics of asymmetric cross-correlation, we can further conclude that the relationship between temperature and yield of soybean exists long-term sustainability characteristics. When agricultural futures market is in decline, cross correlations between weather and returns of agricultural futures market are more sustained than that in rise.