Research On The Degree Of Integration Between Major International Soybean Markets

Soybean is one of the important crops in the international market. It has a wide rangeof uses and a large market demand. Since1996, China increases its soybean imports rapidlyyear by year. Now China imports the highest quantity of soybean in the world. Study thedegree of integration between the major international soybean markets, not only good atjudging the trends of world’s soybean production and trade, but also providing a basis fordeveloping the layout of the upgrade and development planning about Chinese soybeanindustry. Meanwhile traders can use these information to predict the movement of soybeanprice and make the transaction decisions. We select China and Japan as import countries, USand Brazil as export countries to be the research objects. According to their relevant tradeinformation, in order to measure the degree of integration, they are divided into four groups:China and US, Japan and US, China and Brazil, Japan and Brazil. At present, domesticacademic circle always use the cointegration approach to measure the degree of integration,but we use the regime switching model as the main empirical tool and use the result ofcointegration approach for reference. Regime switching model divide the market as12statuses according to the different profits and trade volume. Different statuses mean differentmarket equilibriums. The probability of status is estimated by maximum likelihood method.And then we uses the estimator to analyze the market situation and the degree of marketintegration. Moreover, we compensate the static defects of regime switching model byderiving semiparametric estimates. The result shows that the degree of integration betweenJapan and US is the highest one, followed by China and US, Japan and Brazil, China andBrazil. The probability of their long market equilibrium are0.9，0.84，0.73and0.10E-02. Itseems that there is no long equilibrium between China and Brazil. Although the test to Chinaand Brazil between2008and2010shows that the probability of their long market equilibriumis getting to0.41, the two developing countries still need a long time to develop their degreeof integration. The result of cointegration approach shows that those countries have therelationship of long term integration, just same as the result of regime switching model.