The Research On The Relationship Between China’s Agricultural Futures Prices And Spot Prices

Futures market is an important part of market economic system. The functions of futuresmarket shows in two aspects: price discovery and risk-averse. Agricultural futures market plays animportant role in agriculture commodities production, circulation and consumption in the world.Now, China’s agricultural futures market has entered into the stage of steadily development. How todevelop and improve China’s agricultural futures market is an important task.This paper used econometric methods to analysis the relationship between agricultural futuresprices in the futures markets and spot prices in the spot markets, using soybean meal futures andcotton futures as the examples. First, I will make theoretical analysis of the price discovery functionof futures markets, and analysis the theoretical relationship of the futures prices and the spot prices;then focus on the price discovery role of agricultural futures, using Johansen cointegration test,Granger causality test, error correction model, impulse response function and variancedecomposition econometric methods, to make empirical research on the relationship betweenagricultural futures prices and spot prices; and finally, seek measures to strengthen the functioningof the agricultural futures markets.The empirical results show that: a long-term equilibrium relationship exists between futuresprices and spot prices for soybean meal futures and cotton futures. Futures prices play a one-wayleading role on the spot prices. The short-term deviations of the futures prices and spot prices have asignificant impact on spot prices, but do not have a significant impact on futures prices. Changes infutures prices are mainly influenced by futures markets factors, but weakly influenced by spotmarkets factors. While changes in the spot prices are influenced by the futures markets factors, inaddition to the spot markets factors. One standard deviation from the spot market has a great impacton the futures market, while one standard deviation from the futures market has a small impact onthe spot market.To perform China’s agricultural futures markets’ functions, we need to take a series ofmeasures to improve the management and system of the futures markets. We need to develop new varieties of agricultural futures, improve the market structure of varieties; to perfect futures marketsregulatory mechanisms and the futures markets legal safeguards, and to strengthen the training offutures investors and construction of agricultural information.