Agricultural Futures Market Economy Functions

The agricultural futures markets in China is recovering gradually after more than 10-year' s normalization and reconstruction. Since the markets-oriented reform of the circulation of agricultural product is deepening increasingly and the price of agricultural product is becoming more vulnerable to the fluctuation of international markets, the producers and other markets-partners involved in the market are facing enormous price risk. The slowly-developed futures markets cannot satisfy the need to transfer the increasingly price risk of the underlying agricultural commodities, above all the risk of the grain. The main reason why the futures markets has developed slowly is the incorrect thought of the function of futures markets. Sound research has not been made of the function of futures markets, the factors affecting the function and the ways of employing futures markets. So, based on former relative studies, this thesis aims at making a systemic study on the economic functions of the agricultural futures markets.Beginning with the price risk of agricultural product, chapter one analyses the history and the reason of the agricultural futures markets. The two basic conclusions are:(1) the reason why the futures markets developed is that it decreases the transaction cost of risk transferring;(2) risk transferring is the basic function futures markets.Chapter two makes a detailed introduction and review of literatures about the risk transferring function of futures markets. The theory of normal backwardation put forward by Keynes explains the r stribution between the speculator and hedger. The theory of CAPM made a new anation to the risk premium introduced by Keynes. The theory of price of storage tells us what is price basis and how to interact between the spot price and the futures markets price. Chapter three focus on the risk-decision mechanism of the hedgers. It is hedging transaction that realizes the risk transferring function because the economic logics lies in that futures price is the expectation of the spot price. With The portfolio theory of hedging, the definition of optimal hedge ratio, the standard model of optimal hedge ratio and the effect of hedging are discussed thoroughly.Chapter four turns to the function of price discovery of futures markets which is the derived from the function of risk transferring with the nature of public goods. Futures price is the unbiased estimate of expected spot price, which is based on the function of risk transferring.Chapter five emphasizes the factors that affect the functions of agricultural futures markets. In theory, what affect the liquidity, safety and efficiency of cash transaction will influence the effectiveness of functions.Chapter six makes an empirical study of the functions showed in China' s agricultural futures markets. A key conclusion brought up is that only in particular term the functions played well. The agricultural futures markets cannot satisfy the need of agricultural cash markets. The cash markets, absence of market participants and the policies for futures markets hinder the development of agricultural futures markets.Chapter seven concentrates on the behaviour of farmers and government in futures markets. Why farmers seldom employ futures markets for hedging is that the ways of shifting the price risk encountered by farmers are widely used. Setting up intermediates that organize the farmers is the key step for farmers to make use of futures markets. Futures markets may be taken as alternative for price-supporting policy in agriculture which government usually use.Chapter eight explains the relationship between grain circulation system and futures markets. Based on the conclusion mentioned in the former chapters, the author suggest that the liberalization of grain circulation system constitute new institutional demand, and in turns futures markets promote the liberalization of grain circulation system. In the end a perspective was drawn about the development of agricultural futures markets in China.The inno...