An Empirical Analysis Of The United States Of America Agricultural Product Futures Market Impact On China’s Agricultural Product Spot Market

In recent years, global agricultural products prices volatile has attracted attention ofall countries in the world。Fluctuations in the price of agricultural products not only greatly,long duration, but also relates to the varieties of agricultural products, especially thevolatility in food prices, resulting in a serious impact on the world’s agricultural economy.With advanced economic development and expanding of opening policy, many of ouragricultural products are increasingly dependent on international markets, upgrading theextent of import reliance..The selection of soybean has very strong representation. Soybean is one of China’smajor crops, whose sown area ranks first among three major oil crops. The significance ofsoybean production is not only shown as its ripple effect in national economy, which can’tbe underestimated; but also displayed as the major source of vegetable protein and edibleoil in human diet.According to the statistics released by General Administration of Customs,China’s soybean import dependence was80%in2012, while the U.S. was our largestsupplier.The agricultural product futures market and spot market are complementary.Full-blown agricultural products spot market is the prerequisite for the development of theagricultural product futures market, and the development of agricultural product spotmarket needs regulation and guidance of agricultural product futures market.After20years lessons of the foreign advanced mode, China’s futures market is adaptto China’s rapid economic development, and can partially solve serial problems of energy,food, finance, and industry produced by marketization and internationalization.There hasbeen some empirical data shows that China’s spot market and futures market leading eachother, China’s soybean futures market is weak efficiency In comparison, The United Statesof America futures market has150years of development history, can effectively resolve theagricultural product market risks, the reasonable configuration of resource of agriculturalproducts.and formed authoritative price to attracted capital,improved the international competitiveness of America agricultural products spot andfutures. Based on the huge influence of U.S. futures market on the world; it guides futuresprice in China. Moreover, the U.S. is our largest importer of agricultural products. Under the circumstance of China’s extremely high import dependence, the spot price isinevitably largely impacted by the U.S. futures market.The study of the affects of U.S. agricultural futures market on China’s agriculturalspot market makes great sense, both theoretically and practically. It is quite important toprotect China’s agricultural futures and spot market against risk and to help China graduallyregain international pricing right, as well as to promote the government to make effectivecontrol policies under severe international situation.In this thesis, an overview of the theory about the futures market and spot market wasgiven at first. It defined the concept of futures market and spot market and introduced thefunction of futures market. Afterwards, the potential relationship between the U.S.agricultural futures market and China’s agricultural spot market was analyzed. There aretwo ways for U.S. agricultural futures market to impacts the agricultural spot market inChina. On the one hand, it affects China’s stock market directly via regulating China’simport and export. One the other hand, it exerts its effect on China’s futures market, whichinfluences the spot market thereafter.After reaching theoretical framework, an empirical analysis of the two ways that U.S.Soybean futures markets impact China’s soybean spot markets was done using the canonicalcorrelation analysis and the GARCH model. The conclusion was drawn as following:China’s soybean imports were mainly influenced by the Chicago soybean futurescontract positions and contract opening; while the soybean exports was not significantlyaffected by the Chicago soybean futures market.Finally, according to the theory and empirical results mentioned above; effectivemeasures and polices were recommended based on the two mechanisms that U.S.agricultural futures markets influenced China’s agricultural spot market.