Research On The International Transmission Of China’s Soybean Price Volatility And The Price Risk Aversion

With the development of economy and the progress of the society, peopleincreasingly pursue a proper and healthy dietary pattern. Soybean and its products, akind of ideal comprehensive nutritional food, which contain rich high-quality proteinand a variety of essential vitamins to human body, are increasingly favored by people.Thus the domestic consumption demand for soybean is increasing during recent years.China used to be the world’s largest soybean producer and exporter, but since the1990s, the development of China’s soybean industry began to slow down, and thedomestic production of soybean has been always stuck, which cannot meet theincreasing domestic demand for soybean. In this case, our country can but choose toimport foreign soybean to make up for the large gap between the domestic soybeansupply and demand. As the global largest soybean importer, at present, China importssoybean from three main sources, which are the United States, Brazil and Argentina.China’s soybean import dependence is more and more higher recently, which leads toa limit pricing right and influence in the international soybean market.Under the background of the current international economic and financialintegration, China’s soybean industry is almost completely market-oriented. China’ssoybean market is increasingly impacted by the international soybean market, and thedomestic soybean prices fluctuate frequently. Price stability of the soybean is not onlyrelated to the interests of soybean farmers but the soybean processing enterprises inour country, also relates to the stability of our country’s agricultural products prices,and even the healthy and orderly operation of China’s agriculture and the nationaleconomy. From the macroscopic level, compared with other crops, soybean is one ofthe most important processing raw materials of oil, fodder and food, the industrychain of which is relatively long. The price volatility of soybean will not only affectthe supply and demand of the edible oil, but also cause great uncertainty in thebreeding cost of the animal husbandry. In addition, the price volatility of soybean will also affect the price of other agricultural products, which is of great importance to thedevelopment of agriculture and the stability of the domestic economy. From the microlevel, the price volatility of soybean will not only affect stable income of the soybeanfarmers in our country, but also cause many huge management problems andoperating pressure of the upstream and downstream enterprises in the whole soybeanindustry chain.Based on a large number of the research literature at home and abroad about theprice volatility of soybean, the thesis studies China’s soybean price volatility from theperspective of the international transmission of the price volatility, and puts forwardsome corresponding strategies to avoid the resulting price risk. The thesis is dividedinto five parts: the first part is introduction, which is mainly told about the background,purpose, methods and significance of the research, and summarizes the content andframework of the thesis, and then systematically comb the related literature about thetopic at home and abroad. The second part first defines the agricultural product pricerisk, then expounds the mechanism of agricultural price volatility, and then introducesthe price conduction theory, market integration theory and risk management theoryrespectively.The third part analyzes the status of production and trade of China’ssoybean, which mainly includes the general situation of soybean market in China, thestatus of soybean production at home and abroad and the status quo of the soybeantrade and price volatility in China. The fourth part uses the measurement softwareEviews5.0to make an empirical study of the price volatility of soybean in China fromthe perspective of the international transmission. First, this part makes stationary testand co-integration test of the domestic and international soybean price seriesrespectively, and then it builds the error correction model to study the long-term andshort-term relationship of the soybean market at home and abroad and the pricetransmission. It concludes that the soybean markets both at home and abroad in thelong run are highly integrated, but the price volatility of the international soybeanmarket will not be immediately transmitted to the domestic wholesale soybeanmarkets of the representative provinces. International soybean market impacts thedomestic soybean market by influencing the domestic major soybean markets of the producing areas first, and then based on the co-integration relationship between thedomestic soybean markets, the impact will be transmitted to China’s whole soybeanmarket. The fifth part puts forward some hedging strategies of China’s soybean pricerisk. The sixth part are conclusions and policy recommendations.