The impact of emergence of Chinese international corn markets on Chinese and US corn prices
Because of reduced stockholding, Chinese domestic corn markets are becoming much more interdependent with the rest of the world. As China's economy continues to transition from centrally planned to market oriented, internal pressure for increased use of market mechanisms in trading corn and other commodities is continuous. Moreover, there is also external pressure for increased use of market mechanisms because of the accession of China to the World Trade Organization (WTO). The objective of this article is to evaluate the dynamic interrelationships between Chinese corn prices in producing, consuming and export/import locations and the US Chicago Board of Trade (CBOT) price. A novel dataset including daily prices from dominant cash markets at producing regions, at export/import ports and at major consuming regions within China, as well as prices at Chicago is used in the analysis. Based on results of Vector Error Correction (VEC) model, prices in these markets are correlated in short run while error correction terms indicate long-run relationship among Chinese prices only. Causality relationships suggest that Dalian export price in China precedes the US price in the short run. However, shocks to any of Chinese prices have no long-term impact on the behaviour of US corn prices and the vice versa.
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Volume (Year): 18 (2011)
Issue (Month): 5 ()
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