Research On Corn Price Risk Management In Jinlin Province Based On Insurance And Futures

As one of China's three major economic crops,corn plays a important role in panting,breeding,processing,oil,medicine and other fields and it is the most suitable grain variety for industrialization.Jilin province is located in the golden corn belt in China and corn is the most important crops in this area,therefore,corn planting is the main source of income for the majority of farmers.At the same time,the corn as a kind of agricultural products,inevitably there exists the problem of sharp fluctuations in the price as the result of the corn price volatility.Hence the farmers and corn industry involved take great risks in corn planting.The methods in common use to avoid corn price volatility have a total of two kinds: one is by buying corn futures with its function of price discovery and risk transfer.Agricultural enterprises can buy corn futures to hedge the risk of spot price fluctuations.But for the broad masses of farmers,buying futures is not workable as futures trading rules are too complex and cumbersome.Another approach for the broad masses of farmers is to buy corn price insurance to avoid losses by the risk of price falling.However,it is quite easy to take continuously enormous risks for the insurance company to be caught in high odds.Consequently,a lot of insurance companies mostly earn no or little profit in agricultural insurance business.In the long term,the business will be hard to sustain.Do there exist some kind of workable concepts,which can effectively solve the above problems? "Insurance + futures" pattern has been considered the key to these questions.Hence,from the perspective of "insurance + futures" system,taking corn price range volatility in futures market and cash market data derived from application of G-ARCH model as a reference,this paper targets with making a scientific,reasonable and effective risk management plan for corn-planting farmers and corn processing enterprises in Jilin province.This paper can be divided into four parts to further illustrate my issues.The first chapter is an overview of the paper,which accounts for the theoretical foundation for the overall research and follow-up quantitative studies and the data analysis.Firstly,the significance of the research and purpose of this paper are also described as well as the present status of the research in this field both in China and abroad in this chapter.Secondly,this chapter introduces the methods applied for the research and technical route employed.The second chapter is mainly an empirical analysis on Jilin province maize futures and the spot price volatility in the corn market.This section is the difficulty in the paper,the general fitting degree of corn futures price and spot price based on G-ARCH model is used as a reference data to the normative analysis that follows.The third part analyzes the application of maize price risk management in futures and insurance in Jilin province.Price risk management in futures is firstly further elaborated then that in insurance is illustrated.The fourth part is the focus of the paper composed by chapter four and five.The operation of risk management mode,“insurance plus futures”,has a theoretical detailed analysis and description in this part.According to the analysis,the relevant policy suggestions are put forward for enhancing price risk management to corn farmers,corn processing plants and corn sales enterprise.