Research On Relationship Between China’s Grain Future Market And Spot Market Prices On The Background Of Financialization

As one of the most important agricultural food, grain is also the main source of food for mankind’s survival. So its significance is essential and obvious. There has been a financialization wave around all areas under the background of global economic integration, in which the strong reflection in agricultural field is grain financialization.Grain financialization is an important evolution of grain from general goods to investment one; also is a necessary process for the further development of grain market. Grain financialization makes grain future market get rapid development and let grain properties become the most important factor about grain prices. What relationship between grain future and spot market with grain financialization? Is future market a leader of spot market price? What should do to prevent grain price volatility? These questions are urgent to be answered.Due to the special form of political economy when our nation founded, China has experienced a long era of grain price controlling. Since the reform and opening up, the central government has begun to gradually lower controls on grain price. Especially in the early1990s, there established the market economy system and the grain future market, which laid a solid foundation of grain price marketization operation in China. After entering the21st century, the trade of China’s grain market with the international market increases gradually. China is more dependent on the international market; especially the international grain price volatility is also implicated with Chinese grain market prices after the financial crisis in2008.Ⅰ. The main research contentsThis paper focus on the grain price system on the basis of the actual conditions in China, and does the empirical study on relationship between grain future market and spot market price in the process of financialization in China, so as to explore the model of grain market prices adapting to new stage in China; and put forward the corresponding policy recommendations on food safety and food pricing mechanism for governments. This paper is divided into six chapters. Chapter1is introduction, including the context and significance of the research, and then literature review at home and abroad related mainly grain financialization, grain price fluctuations, grain price conduction mechanism, factors affecting grain prices and grain security.Chapter2is about the conceptual analysis of financialization and grain financialization. The first part offers the basic meaning of financialization starting with its background and process, then analyzes the effects brought by financialization. The second part gives the concept of grain financialization with its background and analyzes the economic and social effects related grain financialization combined with the characteristics of grain financialization.Chapter3mainly presents the formation of China’s grain price mechanism and the grain price system. The first part starting from the emergence and development of the grain future market, analyzes the grain futures price formation and the function of the grain futures market. The second part studies the evolution of the grain price mechanism at early times and does a further analysis of the formation of China’s grain spot market and future market price under the market economy.Chapter4introduces the basic definition of price fluctuations, and analyzed the characteristics of price fluctuations from the points of view of grain commodity. The major factors affecting grain spot market include cost, supply, demand, and market. While the factors influencing the grain future market mainly are macro-economy, energy, exchange rate and capital and so on.Chapter5aims at correlation analysis of China’s grain future market and spot market price fluctuations by selecting wheat, corn, soybeans as samples in recent five years to do the empirical research.Chapter6is conclusions and suggestions of this paper with further explanation on the empirical analysis results. The putting forward related suggestions of China’s grain safety and grain pricing mechanism according to the actual situation in China.Ⅱ. The main research conclusion(1) There existed the long co-integration relationship of China’s grain future market and spot market price, in which three grain coefficient varieties shows strong correlation, reflecting that the grain future price has obvious effect on the spot price in China’s grain price system.(2) Different kinds of grain future market affects spot market price differently, in which the corn future price affect most and second is the wheat, the last is soybean future price. Overall, China’s grain futures market can discover spot market price quickly with some restrictions including policy.(3) The guideline of grain future market to spot market still needs to be strengthened. Grain future market can help avoid risks of spot market and grain price, but the limitation of history factors and systems of China’s grain prices market make China’s grain future market need to be further guided.Ⅲ. The research of policy recommendations(1) Chinese grain security-oriented under the background of grain financialization. In the acceleration era of the global grain financialization, China’s grain safety faces great pressure. In order to ensure the security of Chinese grain, stabilize the rising prices, we should change grain development strategy and focus on grain safety firstly. Continuing to infrastructure spending on grain industry and reducing natural risks of farmers in the grain production is the second step. Finally we must improve the international weather of grain trade, and actively participate in the international grain market which playing a pivotal role in leading grain prices.(2) Price management Chinese grain market. Because of affection factors such as the late start, production limitation and policy, pricing management of Chinese grain market should start from strongly developing grain order future and varying kinds of grain future. At the same time, breaking local protectionism of grain and gradually unifying national grain price market are necessary to be done as well as lowering controlling of grain price continually and realizing its marketization on the basis of the sufficient supply of grain.