Price bubbles of agricultural commodities: evidence from China’s futures market

The frequent price volatility in China’s agricultural futures market has aroused concern about price bubbles in the agricultural futures market. This paper analyzes the characteristics of price bubbles in China’s agricultural futures market by using data from nine active agricultural commodities futures and the Nanhua agricultural price index. The empirical results show that only soybean futures, sugar futures, cotton futures, and the Nanhua agricultural price index exist price bubbles. The duration of price bubble accounts for 2.5–6.2% of the whole sample interval. Moreover, combined with China’s agricultural policy, this paper finds that after 2014, China’s policy reform from the “yellow box” policy to the “green box” policy and the “blue box” policy can inhibit price bubbles of agricultural futures market to a certain extent. Additionally, the higher the dependence on the international market, the higher the risk of price bubbles in the agricultural futures market. Besides, agricultural futures are more prone to price bubbles with long duration and large price change during the agricultural crisis (soybean and cotton experienced price bubbles from 2007 to 2008 and 2010 to 2011, respectively). The findings of this paper have important policy implications for policy-makers.