The Impact Of International And Domestic Future Market On Domestic Agricultural Product Price

Agriculture is very important to an economy. Recently we have seen that China’s agricultural market is quite unstable. The price of agricultural produces move up and down significantly and frequently. As we know, one of the functions of the Future market is price discovery which could guide the spot market become more stable. The prerequisite is that the Future is mature enough. However, the Future market of China has develops just20years, whether the function of price discovery works is still unknown.In this paper, we tried to find the relationship of the agricultural Future market and the spot market. In this way, we could find out the efficiency of domestic Future market. However, as the financial markets in the world linked closely, we could not depart our domestic Future market from international Future markets. As a result, we took American Future market in to account in research of the link between Chinese Future market and spot market. Another way for international Future market to influence our spot market is through the international trade. So, we have to that international trade into our modal.We build a framework of the four elements:the Future price and the Spot price of China, the Future price and the market price of the world. After describe the theory of the relationships between them, we made an empirical research. Granger causality test, VAR model and other econometric tools are used in the corn market.The results show that, in the corn market, Chinese Future price has close link with spot price. This means that our domestic corn Future market is mature enough to guide the spot price. However, the link between the international Future market and domestic spot price is not significant.