Research On China’s Wheat And Cotton Price Fluctuations

After the1990’s, the varieties of China’s agricultural products price fluctuations gradually diffuse from food to cotton, sugar, animal products, vegetables and other non-food species. There are differences in inputs, the changes of production and demand, market openness and policies in different agricultural products. So are there the differences in price fluctuations characteristics, influence factors and transmission mechanism in different agricultural products? Given the differences and similarities between wheat and cotton in the above several aspects, this study selects the two important agricultural products as the research objects. Through the comprehensive research of wheat and cotton price volatility characteristics, influence factors and the transmission mechanism, this study provides suggestions of markets stability to promote the healthy and stable development of wheat and cotton, as well as provides reference for the improvement of other agricultural products regulation policies.First of all, the long-term price volatility of wheat and cotton is measured, cycles are divided, components are decomposed and features of the short-term price fluctuations are analyzed in this study. There are differences between the changes and characteristics of wheat and cotton price volatility in different times. Based on the calculation of annual price volatility, it found that wheat price volatility was reduced, and cotton price volatility became higher after2000. On the whole, the amplitude of cotton price fluctuations is greater than that of wheat price fluctuations. Supply, demand and policies are main reasons of price volatility cycles formation. Through the decomposition of monthly price fluctuations after2000, we find that there are deterministic trend of steady growth in wheat and cotton prices, and significant cyclical. What’s more, random shocks to fluctuations, such as natural disasters, economic crisis and policies are very enormous.Secondly, this thesis respectively analyzes supply, demand, and trade situation and policies influencing on wheat and cotton price fluctuations. It is concluded that there are similarities and differences between factors affecting wheat price fluctuations and cotton price fluctuations. Next, it constructs simultaneous equations under the partial equilibrium theoretical framework, and simulates scenes on main exogenous variables affecting price fluctuations, thus to find out the main factors affecting or suppressing fluctuations. The results show that material cost and per capita GDP growth are main factors that influence2007-2012domestic wheat price fluctuations, and material cost has a greater impact. International wheat price has little impact on domestic wheat price. Subsidy policy and the minimum purchase price policy improve the enthusiasm of farmers, as well as guarantee the stability of wheat production and steadily rising of the price. So wheat price is relatively stable.Textile and apparel exports, domestic labor costs, and natural disasters are the dominant factors affecting2007-2012domestic cotton price volatility, and the order of important degree of the above exogenous variables changes in different stages. International cotton price has great influence on domestic cotton price. The policy of import sliding tax has played an important role to a certain extent in stabilize domestic cotton price, while the policy of subsidy for superior crop varieties has limited role to promote the production and stable cotton price. Reserve policy has played an important role in stabilizing cotton price, while also widened the gap at home and abroad.Finally, the thesis discusses the transmission mechanism of price fluctuations, including characteristics and reasons of price volatility between industrial chain upstream and downstream, the relationship between futures price and spot price, volatility spillover effect. There are different characteristics of upstream and downstream prices transmission due to different closely degree of wheat and cotton industry chain. The vertical market link of wheat industry chain is loose.There is a long run linear equilibrium relationship and no asymmetry in the short term between wheat price and flour price. At the other hand, the vertical market link of cotton industry chain is more closely. So there is equilibrium relationship in the long run and a nonlinear adjustment relationship and negative asymmetric transmission in the short term between cotton yarn price and cotton price.Through the study of relationship between futures price and spot price, we can get the conclusion that price discovery function of wheat futures prices is low, and the volatility spillover effect from wheat spot market to wheat futures market is obvious. Simultaneously, cotton futures price is in the dominant position in price discovery, and there is a bidirectional volatility spillover effect between spot price and futures price, which is greater from futures price to spot price.Based on the above conclusions, this study puts forward serval proposals from raising the production capacity and efficiency of wheat and cotton, promoting the industry development, strengthening the construction of the futures market, perfecting the emergency management system, maintaining market-oriented reform direction of agricultural regulation policies, trade policy and so on.