Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market
Emerging economies often establish commodity futures markets to discover price signals, manage price risks and improve market integration, but establishing a futures market may not be feasible for agricultural perishables. In this study, we evaluated the function of the world's first fresh frui...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Czech Academy of Agricultural Sciences
2023-12-01
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| Series: | Agricultural Economics (AGRICECON) |
| Subjects: | |
| Online Access: | https://agricecon.agriculturejournals.cz/artkey/age-202312-0005_are-futures-markets-functioning-well-for-agricultural-perishables-evidence-from-china-8217-s-apple-futures-ma.php |
| _version_ | 1827579098729283584 |
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| author | Qianqian Mao Jens-Peter Loy Thomas Glauben Yanjun Ren |
| author_facet | Qianqian Mao Jens-Peter Loy Thomas Glauben Yanjun Ren |
| author_sort | Qianqian Mao |
| collection | DOAJ |
| description | Emerging economies often establish commodity futures markets to discover price signals, manage price risks and improve market integration, but establishing a futures market may not be feasible for agricultural perishables. In this study, we evaluated the function of the world's first fresh fruit futures contract for apples. Combining partial cointegration with state-space modelling, we derived time-varying price discovery metrics for the apple futures market. Our findings revealed a limited and time-varying dominance of price discovery by the futures market, while a substantial share of price discovery occurred in the spot market. Moreover, poor convergence of disaggregated spot prices to the futures price suggests that commercial traders in the apple supply chain tended to focus more on the spot market than on the futures market. Thus, emerging economies should be cautious about the new establishment of futures markets for agricultural perishables. Future research using more specific data on the spot market may provide a better insight on the limited function of the futures market. |
| first_indexed | 2024-03-08T21:57:53Z |
| format | Article |
| id | doaj.art-3b007eee60884654a362d58e5642b63b |
| institution | Directory Open Access Journal |
| issn | 0139-570X 1805-9295 |
| language | English |
| last_indexed | 2024-03-08T21:57:53Z |
| publishDate | 2023-12-01 |
| publisher | Czech Academy of Agricultural Sciences |
| record_format | Article |
| series | Agricultural Economics (AGRICECON) |
| spelling | doaj.art-3b007eee60884654a362d58e5642b63b2023-12-19T16:47:57ZengCzech Academy of Agricultural SciencesAgricultural Economics (AGRICECON)0139-570X1805-92952023-12-01691247148410.17221/278/2023-AGRICECONage-202312-0005Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures marketQianqian Mao0Jens-Peter Loy1Thomas Glauben2Yanjun Ren3School of Economics, Zhejiang University of Technology, Hanghzou, ChinaDepartment of Agricultural Economics, University of Kiel, Kiel, GermanyLeibniz Institute of Agricultural Development in Transition Economies (IAMO), Halle, GermanyCollege of Economics and Management, Northwest A & F University, Yangling, ChinaEmerging economies often establish commodity futures markets to discover price signals, manage price risks and improve market integration, but establishing a futures market may not be feasible for agricultural perishables. In this study, we evaluated the function of the world's first fresh fruit futures contract for apples. Combining partial cointegration with state-space modelling, we derived time-varying price discovery metrics for the apple futures market. Our findings revealed a limited and time-varying dominance of price discovery by the futures market, while a substantial share of price discovery occurred in the spot market. Moreover, poor convergence of disaggregated spot prices to the futures price suggests that commercial traders in the apple supply chain tended to focus more on the spot market than on the futures market. Thus, emerging economies should be cautious about the new establishment of futures markets for agricultural perishables. Future research using more specific data on the spot market may provide a better insight on the limited function of the futures market.https://agricecon.agriculturejournals.cz/artkey/age-202312-0005_are-futures-markets-functioning-well-for-agricultural-perishables-evidence-from-china-8217-s-apple-futures-ma.phpmarket integrationpartial cointegrationprice discoveryprice transmission |
| spellingShingle | Qianqian Mao Jens-Peter Loy Thomas Glauben Yanjun Ren Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market Agricultural Economics (AGRICECON) market integration partial cointegration price discovery price transmission |
| title | Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market |
| title_full | Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market |
| title_fullStr | Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market |
| title_full_unstemmed | Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market |
| title_short | Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market |
| title_sort | are futures markets functioning well for agricultural perishables evidence from china s apple futures market |
| topic | market integration partial cointegration price discovery price transmission |
| url | https://agricecon.agriculturejournals.cz/artkey/age-202312-0005_are-futures-markets-functioning-well-for-agricultural-perishables-evidence-from-china-8217-s-apple-futures-ma.php |
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