The Empirical Analysis Of The Impact Of International Oil Price On China’s Argriculture Commodity Price

The relationship between oil price and agricultural prices has always been the focus problem. In China, agricultural imports and external dependency of oil increase. At the same time, the domestic market of crude oil and product oil market is more and more open. This will cause The relationship between international oil price and agricultural prices of china is increasingly close. But because of China’s special product oil pricing mechanism and regulation policies of domestic agricultural prices, the international oil price may be have nonlinear effect on China’s agricultural prices.As a proxy for international oil price level, we use the daily price data of Brent crude oil futures. As a proxy for China’s agricultural commodity prices level, we use the daily price data of DCE corn and soybeans futures. We use cointegration test with structural break, threshold cointegration, and nonlinear cointegration test to analyze data from December 22,2004 to January 30,2014. The nonlinear analysis shows that: (1) there is structure break between international oil and China’s agriculture commodity, respectively July 2007 for soybeans and August 2008 for corn. Cointegration relationship between international oil and China’s agriculture commodity changed after the structure break, there is no linear long-term equilibrium relationship before the structure break, but after the structure break the linear long-term equilibrium relationship exist between international oil and China’s agriculture commodity. (2) On the overall sample interval, international oil price and China’s agricultural prices(expect soybeans 2) exist significant nonlinear adjustment process. (3) there is no causal relationship between the international oil prices and China’s agricultural prices before 2007; but after 2007, international oil price is nonlinear Granger reason of corn price, and two-way causal relationship exist between international oil and soybean price. This suggests that there is nonlinear cointegration relationship between international oil and China’s agricultural prices, and the international oil price has nonlinear effects on China’s agricultural prices after 2007. This study also explain the main empirical results and provide recommendations for policymakers and investors.