An Empirical Study On The Influence Of American Agricultural Products Futures Market On Our Agriculture Productss Spot Market

China is a big country of agricultural production and trade. With advanced economic development and expanding of opening policy, many of our agricultural products are increasingly dependent on international markets, upgrading the extent of import reliance.The selection of soybean and corn has very strong representation. Soybean is one of China’s major crops, whose sown area ranks first among three major oil crops. The significance of soybean production is not only shown as its ripple effect in national economy, which can’t be underestimated; but also displayed as the major source of vegetable protein and edible oil in human diet. The production and consumption of corn in China is second only to the United States, enabling China to be the second largest corn producer. Corn is the third-largest food crop in China, and its production next to rice and wheat. Being the raw material for livestock feed and corn processing, it is the basis for the development of animal husbandry and corn processing industry. Therefore, corn production plays a critical role in grain production and security. According to the statistics released by General Administration of Customs, China’s soybean import dependence was close to80%in2010, while the U.S. was our largest supplier. Meanwhile, corn imports increased significantly. China imported1.57million tons of corn in2010, of which about1.5million tons came from the U.S. The degree of dependence on imports has remained high.Most of the literature has shown that the spot market and futures market interacts with each other in both China and the U.S. Based on the huge influence of U.S. futures market on the world; it guides futures price in China. Moreover, the U.S. is our largest importer of agricultural products. Under the circumstance of China’s extremely high import dependence, the spot price is inevitably largely impacted by the U.S. futures market. Nowadays, no matter the agricultural spot market or futures market in China is far behind that of the U.S. The study of the affects of U.S. agricultural futures market on China’ s agricultural spot market makes great sense, both theoretically and practically. It is quite important to protect China’s agricultural futures and spot market against risk and to help China gradually regain international pricing right, as well as to promote the government to make effective control policies under severe international situation. In this thesis, an overview of the theory about the futures market and spot market was given at first. It defined the concept of futures market and spot market and introduced the function of futures market. Afterwards, the potential relationship between the U.S. agricultural futures market and China’s agricultural spot market was analyzed. There are two ways for U.S. agricultural futures market to impacts the agricultural spot market in China. On the one hand, it affects China’s stock market directly via regulating China’s import and export. One the other hand, it exerts its effect on China’s futures market, which influences the spot market thereafter.After reaching theoretical framework, an empirical analysis of the two ways that U.S. soybeans, corn futures markets impact China’s soybean, corn spot markets was done using the canonical correlation analysis and the GARCH model. The conclusion was drawn as following:China’s soybean imports were mainly influenced by the Chicago soybean futures contract positions and contract opening; while the soybean exports was not significantly affected by the Chicago soybean futures market. In comparison, the corn imports and exports were mainly influenced by the Chicago corn futures closing price and volume. Chicago soybean futures prices guided that in China. Meanwhile, the corn futures market and spot market interacted with each other. In this way, China’s soybean spot market was under the long-term control of the U.S. futures market.In addition, the corn futures market and spot market guided each other in a long term in China; concluding that Chicago corn futures market impacted China’s corn spot price through its long-term effects on China’s futures market. However, the guidance of the Chicago corn futures market is weaker than its soybean futures market.Finally, according to the theory and empirical results mentioned above; effective measures and polices were recommended based on the two mechanisms that U.S. agricultural futures markets influenced China’s agricultural spot market.