Research On Fluctuations And Transmission Of Corn Futures Price And Spot Price Between China And America

Corn is the largest crop in China, and even the world. Fluctuations in corn prices are directly related to the majority of farmers’ income, but also indirectly affect consumers on purchasing meat, eggs and other daily necessities price levels. Agricultural futures market originated in America, have an important price discovery and hedging functions. Rely on the America’s important position in the international corn market and CBOT price discovery function, America becomes the world’s corn pricing center. CBOT corn prices has also become an important tool for American agriculture policy development, trade settlement and agricultural finance which greatly promotes the development of modern American agriculture. It has great significance to research the fluctuations and transmission of Sino-US corn futures and spot price as America has been China’s main source of corn imports and the corn pricing center of the world.Removing the seasonal factors and irregular variables impacting the Sino-US corn prices with X-12 seasonal adjustment model, found that China and America’s corn are both affected by seasonal factors and irregular factors, but the China corn’s seasonal pattern is stronger than the America corn’s, however its impact by irregular factors on prices is significantly smaller. According to the Sino-US long-term trend and cycle fluctuation concluded by HP filter, found the corn price fluctuations of the two countries both showed a certain cycle regularity, but the volatility and the price risk of the China corn is less than the America corn, which also shows that China corn’s marketization is still not enough.To learn more of the transmission of corn futures price and spot price between China and America, ADF stability test,co-integration regression test;, Granger causality test, variance decomposition test methods are used to straighten out the relationships among the four.The results shows China and America corns both have a long-run equilibrium relationship between futures and spot. The prices transmit to each other. And the futures prices impact spot even more. It proves the futures market price discovery function is played in both countries. The America corn futures and spot have a relationship of a long-run equilibrium and one-way guide with the China corn, but there is a time lag. Meanwhile, the China futures and spot prices have little effect on the America corn market. It means the China corn is influenced by the international corn market prices but on the other hand, the China corn market also has a strong independence and closure.Therefore, this article recommends the relevant businesses, planting cooperatives, family farms to pay more attention to the futures price discovery function and actively use the futures to hedge for getting rid of market risks. Also it suggests the policy makers to reduce the political intervention in corn prices and let the market factors play a more important role in price formation.