Financialization Of Food And Food Prices:Influence Relationship And Conduction Path

Fluctuations in food prices can easily lead to food crises that endanger national security.In recent years,with the global food supply being relatively sufficient,the relationship between food supply and demand has not changed fundamentally.And the cost of food production has not changed drastically.However,we can see the frequency of abnormal fluctuations in domestic food prices has accelerated,and the fluctuating time is also getting longer.So it is difficult to explain the mystery of frequent food price fluctuations using the traditional food price theory only.In sharp contrast,the convergence of food price volatility and financial market volatility has become more apparent.Meanwhile the penetration of financial variables into food production,trade,and investment has intensified.And the financial attributes and functions of food commodities have gradually emerged.All the above financialization tendency of food has caused a wide range of academic concerns.Special national conditions in China determine the special strategy of food security.Grain market as well as food policies in China are different from developed countries and different from ordinary developing countries.Self-protection ability of food and relative stability of food prices play a special role.In recent years,economic operation system and international trade environment in our country have undergone significant changes.On the one hand,with the marketization and internationalization of food being continuously improved,grain imports of our country have hit record highs,and the impact of international food prices on the domestic market has become increasingly apparent.On the other hand,with increase in the degree of food financialization,the impact of financial policies,financial markets,and food investment on food prices has gradually spread.Therefore,the mechanism for the formation of food prices is increasingly complex.Therefore,studying the impact of food financialization on food price has important theoretical and practical significance.Based on the theory of price and the theory of economic financialization,this paper constructs an analytical framework for the relationship between financial factors and food prices.The paper,based on a logical starting point of the transform from commodity attribute about food only into dual attributes involved financial attribute,analyzes the characteristics,performance and the basis of food price formation under the background of food financialization.The introduction of financial variables as exogenous conditions reveals the mechanism and path of food price formation,volatility and transmission under the influence of financial factors from three dimensions: monetary factors,investment factors and financial market linkage.Drawing on the analytical paradigm of “intermediary effect”,this paper explored the transmission process and path of financial factors affecting food prices.In order to test the theoretical hypothesis above,the paper analyzes and compares the changes and characteristics of international and domestic food price evolution,the pattern of non-financial factors and financial factors affecting food prices.Also the paper empirically verifies the extent and conditions of influence of financial factors from multiple perspectives such as the markets interaction between international and domestic,futures and spots on the food price formation,fluctuations,and transmission.Based on the theoretical and empirical analysis results,this paper puts forward the idea of constructing a food security strategy under the background of food financialization.The main conclusions of this paper are as follows:Firstly,the volatility of food prices has increased,and the factors affecting food prices are more complicated.The research in this paper finds that under the background of relatively stable grain supply and demand in China,the fluctuation of grain prices is becoming more and more frequent,and food prices shows more and more irrational fluctuation.The traditional price-determination theory based on supply and demand equilibrium is significantly weakened to interpret food prices.With the growth of grain trade,grain investment and grain speculation,the supply pattern and structure of food have undergone a fundamental transformation.Psychological expectations,money supply,investment,and other non-supply factors have had an important impact on the formation and volatility of food prices.Secondly,the financial functions and attributes derived from the functions and attributes of food commodities are gradually strengthened.In the modern economy,food has become an important transaction object,investment and speculative target.The use of food is no longer confined to meet daily consumption.The simple commodity attribute of food is weakening,while the characteristics of “financial commodity” of food are becoming more and more Prominent.The research in this paper provides empirical conclusions for the above viewpoints,that is,compared with the narrow fluctuation of food consumption,the scale of investment in financial instruments such as food futures has increased significantly,and such investment has distorted the original demand structure of foods,and food has become a typical financial instrument.Thirdly,the financialization of food is obvious,and financial factors have contributed much to food prices fluctuation.In the context of economic financialization,the penetration of financial factors into food prices is reflected in the production,circulation and trade of food.The empirical research in this paper proves that domestic food futures prices and spot prices are significantly affected by financial factors.Food varieties highly dependent on import are more sensitive to financial factors such as international futures prices and exchange rates.Fourthly,food financialization has intensified food price volatility.The research in this paper finds that the fluctuation of domestic food prices is highly correlated with the fluctuation of securities market in terms of time point,direction and degree.The fluctuation of food prices lags behind the fluctuation of securities market as a whole.The frequency and degree of short-term large fluctuations in domestic food prices are higher than international.There is a certain synergy between international food prices and domestic food prices.Fifthly,the food price transmission has a mediating effect in the context of food financialization.This paper theoretically analyzes the complexity,indirectness and extensiveness of financial factors affecting food prices,and reveals the mediating effect of financial factors on food prices through empirical analysis.Under the background of financialization,there are two major characteristics of China's food price transmission.First,the domestic securities market and the food futures market are coupled with each other.The securities market price affects the food spot market through the futures market.Second,the international food prices are transmitted through the futures market to domestic food prices.Compared with previous studies,the possible innovations of this paper are as follows:(1)Aanalyzing the formation mechanism and transmission path of food prices from the perspective of financialization and expands the traditional food price theory.Most of the existing literatures study the formation and transmission mechanism of food prices from the perspective of traditional commodity price theory.Even if some studies focus on financial factors,they just focus on normative analysis and qualitative analysis,which is not convincing to explain the abnormal fluctuations in food prices that have emerged in recent years.Based on the changes in the attributes of food commodities and the basic facts highlighted by the characteristics of food finance,this paper defines the connotation of food finance,and studies the impact of grain finance on the formation mechanism and transmission path of food prices.This series of research has innovated the research perspective of food prices and volatility and expanded the traditional food price theory.(2)Studying the quantitative characteristics and structural characteristics of food price fluctuations under the background of financialization,deepening the law of food price fluctuation.The food price shows atypical fluctuation characteristics under the trend of financialization.It should not only stay on the surface wave phenomenon studied in the previous literature,but also explore more structural features.Neglecting a comprehensive survey of the characteristics of food price volatility will not accurately grasp the law of food price fluctuations and make countermeasures.This paper firstly analyzes the time trend and quantitative characteristics of food price fluctuations from the total amount,and then uses the comparative analysis model to study the short-term fluctuation effects of food financialization,including structures of different food varieties such as the clustering,asymmetry,spillover effects.This provides more reliable empirical data to support the argument that food financialization will intensify food price volatility.A comprehensive understanding of food volatility characteristics will also facilitate more policy decision-making.(3)Studying the mediating effect of food price transmission,revealing the grain price transmission mechanism under the background of financialization.The linkage between food and other markets in the context of financialization has been confirmed by volatility testing,and many studies often stop at the direct transmission relationship between such market indicators,ignoring the indirect mechanism of mediating variables.Based on the simple regression method,this paper uses the mediation effect test method to reveal the micro-mechanism in food price transmission.This deepens the understanding of the entire conduction process,and provides a new intermediary target operation idea for achieving the ultimate goal in practice.