The Increasing Participation of China in the World Soybean Market and Its Impact on Price Linkages in Futures Markets

Transcription

1 The Icreasg arcpao of Cha he Word Soybea Marke ad Is Ipac o rce Lkages Fuures Markes by Mara Ace Móz Chrsofoe Rodofo Margao da Sva ad Fabo Maos Suggesed cao fora: Chrsofoe M. A. R. Sva ad F. Maos The Icreasg arcpao of Cha he Word Soybea Marke ad Is Ipac o rce Lkages Fuures Markes. roceedgs of he NCCC-34 Coferece o Apped Coody rce Aayss Forecasg ad Marke Rsk Maagee. S. Lous MO. [hp://

2 The Icreasg arcpao of Cha he Word Soybea Marke ad Is Ipac o rce Lkages Fuures Markes Mara Ace Móz Chrsofoe Rodofo Margao da Sva Fabo Maos* aper preseed a he NCCC-34 Coferece o Apped Coody rce Aayss Forecasg ad Marke Rsk Maagee S. Lous Mssour Apr * Mara Ace Chrsofoe (achrs@esaq.usp.br) ad Rodofo Sva (rodofo@esaq.usp.br) are graduae research asssas a he Depare of Ecoocs Adsrao ad Socoogy Uversy of São auo ad Fabo Maos (fabo.aos@ad.uaoba.ca) s asssa professor a he Depare of Agrbusess ad Agrcuura Ecoocs Uversy of Maoba.

3 The Icreasg arcpao of Cha he Word Soybea Marke ad Is Ipac o rce Lkages Fuures Markes Ths paper exaes prce kages bewee soybea fuures coracs raded Cha U.S Braz ad Argea for he perod ragg fro 2002 o 20. The a fdgs show ha U.S. prces s appear o have a doa roe o expa prce chages eraoa arkes. Resus aso dcae sroger kages bewee prces Cha ad he oher hree arkes especay afer Ths resu suggess he Chese arke has becoe ore egraed wh eraoa arkes rece years whch gh refec he growg parcpao of Cha eraoa rade ad he deveope of s soybea fuures corac. Keywords: soybeas fuures arkes Cha prce kages INTRODUCTION The word arke for soybeas has ypcay bee characerzed by hgh cocerao o boh suppy ad dead sdes. U.S Braz ad Argea are he aor producers ad exporers. Accordg o he UN-COMTRADE (20) oa expors by hese coures respoded for aos 90% of a soybeas raded over he pas eeve years. O he dead sde daa fro he UN-COMTRADE (20) show ha Cha ad E.U. currey accou for approxaey60% ad 5% respecvey of a soybea pors he word. However Cha oy eerged as a aor soybea porer durg he as decade. U 2002 Cha was he secod arges porer he soybea arke bu sce he sared o por creasg quaes of soybeas. Bewee 2002 ad 200 soybea pors by Cha grew a a average rae of 23% per year. Ths expaso pes ha Cha currey buys os of he soybeas expored by Braz U.S. ad Argea. I 200 Cha was he desao of 64% of Braza soybea expors 56% of U.S. soybea expors ad 82% of Argee soybea expors (UN-COMTRADE 20). Durg he as decade Cha has aso expaded s fuures arkes. Daa fro he Fuures Idusry Assocao (FIA) shows ha egh of he e os raded coody fuures coracs he word are currey Cha. The Daa Coody Exchage (DCE) s oe of he os pora coody exchages Cha ad has reached records of radg voue rece years. The voue of DCE s soybea fuures corac creased aos efod bewee 2002 ad 2008 (fro 25.4 o coracs 2002 o o 2008) ad he dropped o 50.5 o coracs 20 (DCE 20). No rece sudy has expored how he creasg parcpao of Cha he soybea word rade sce 2002 ad he expaso of s fuures arkes have affeced prce reaoshps bewee a four aor soybea coures. Oy Zhao e a. (200) aeped o vesgae prce kages bewee Cha Braz U.S. ad Argea recey bu hey oy used spo prces fro Braz U.S. ad Argea bewee Noveber 2006 ad Juy I addo hey focused o chages prce reaoshps before ad afer Sepeber Furher sudes are eeded hs opc order o aso corporae fuures prces a Whe sugar rubber coo soybeas soybea o soybeas ea are soe exapes. However oe ha corac sze Chese fuures arkes ed o be saer ha oher coures. 2

4 coures expad he sape perod o capure he srog growh of Chese pors he eary 2000 s ad ake o accou he arge crease ad subseque decrease Chese fuures radg. The obecve of hs paper s o expore prce kages soybea fuures arkes. I parcuar hs sudy w vesgae he exsece of shor- ad og-ru prce reaoshps bewee soybea fuures coracs raded a he Daa Coody Exchage (DCE) Cha CME Group U.S BM&FBOVESA Braz ad Mercado a Téro de Bueos Ares (MATba) Argea. These four coures were seeced because hey have bee he os acve payers he soybea arke for severa years ad her exchages offer fuures coracs o soybeas. The sape perod goes fro 2002 o 20 ad w be dvded o hree sub-perods so ha w be possbe o aayze how rece chages eraoa rade of soybeas ad fuures radg voue Cha affeced prce kages. The frs subperod w be whe Cha was porg growg quaes of soybeas fro U.S ad Braz bu he radg voue a he DCE was s ow. The secod sub-perod w be whch was s characerzed by rsg pors ad aso by arge creases fuures radg voue Cha. The hrd sub-perod w be whe fuures radg voue decreased Cha. Resus fro hs research ca provde ew sghs o he roe of eraoa rade ad fuures radg he deveope of prce kages bewee eergg ad deveoped arkes aog wh correao srucures bewee hose arkes. Furher ca hep shed gh o he dyacs of he soybea word arke ad provde updaed forao o how prces are rased as Cha eerges as a aor porer ad deveops s ow doesc arke. REVIOUS RESEARCH The eraure has geeray recogzed he bechark roe of he U.S soybea fuures corac. The U.S. arke preseed ay sudes a doa roe he rassso of reurs ad voaes. However oher sudes have aso show evdece of bdrecoa prce reaoshps bewee Argea Braz Cha ad Japa. A sudy focusg excusvey o spo prces was coduced by Margardo e a. (2007). They used por prces fro he Roerda por ad expor prces fro Braz Argea ad U.S. o a ohy bass fro Ocober 995 o Ocober Ther fdgs sugges he exsece of a og-ru reaoshp bewee he four prces bu ed shor-ru eraco. Roerda ad U.S. appeared o be prce akers he eraoa arke whe prces fro Braz ad Argea dd o fuece he behavor of U.S. ad Roerda prces. Moreover he arge Braza soybea expors o E.U. ay have expaed he os reeva pacs of prce chages fro he Roerda prce varaos o Braza prces whe copared o he effecs fro he U.S. arke o Braza arke. Durg he sape perod adoped by Margardo e a. (2007) he E.U. was s he aor porer of soybeas he word arke whe U.S. Braz ad Argea were aready he a exporers. More rece sudes cosderg a e perod whe Cha had aready deveoped s fuures arke ad becoe he arges soybea porer sared o expore prce kages wh Cha boh he spo ad fuures arkes. Lu ad A (2009) vesgaed kages bewee soybea prces usg day spo ad fuures prces Cha ad 3

5 fuures prces he U.S. fro Jauary 998 o Deceber They foud bdrecoa reaoshps bewee spo ad fuures prces Cha spo prces Cha ad fuures prces he U.S. ad fuures prces boh coures. Addoay here was sgfca voay spover bewee arkes wh greaer agude fro U.S. fuures arke o he Chese fuures arke. The auhors aso used forao shares adused for o-sychroous radg o expore he prce dscovery process. They foud he U.S. corbuo was 42.7% whe he shares of he Chese fuures ad spo arkes were 40.2% ad 7.08% respecvey. A broader sudy was coduced by Zhao e a. (200) who exaed how expor prces fro U.S. Braz ad Argea were ked o spo ad fuures prces Cha. They used day prces fro Cha (spo ad fuures) Braz (FOB araaguá) Argea (FOB Up Rver) ad U.S. (CIF Guf). The auhors foud ha he reaoshp bewee Chese fuures prces ad eraoa prces s sroger ha he oe vovg Chese spo prces ad foreg prces. Furherore he sudy preseed ha Chese doesc arke (spo ad fuures) has feedback effecs of prcg he eraoa arke represeed by U.S Braz ad Argea. The sudy foud bdrecoa reaoshp bewee Argee prces ad Chese spo ad fuures prces ad aso bewee DCE ad U.S. (CIF Guf). Accordg o he auhors as a possbe refeco of he reduco Braza soybea expors o Cha 2007 Braza prces seeed o be paced by he Chese fuures prces bu he oppose reaoshp was o observed. Zhao e a. (200) aso waed o assess he pacs of he goba faca crss 2008 o soybea arkes. They sp he sape o wo subperods defg Sepeber 5 h 2008 as he break po. Ther resus show ha afer Sepeber 2008 he agude of he VECM coeffces have cosderaby chaged cudg he error correco ers whose esaed paraeers creased coparg o he pror perod. Those rece sudes show evdece of kages bewee Chese prces ad eraoa prces. These fdgs coras wh resus fro eary papers o prce kages bewee Cha ad oher soybea arkes suggesg ha he coeco bewee Cha ad he word arke has eerged ad becoe sroger he as decade. Oe of he frs sudes o hs opc s S (200) who used weeky cosg prces bewee Jauary 996 ad Apr 999 o es he Law of Oe rce for soybea fuures coracs raded Cha (DCE) ad U.S. (CME). The fdgs aready dcaed ha boh fuures prces were egraed he og ru. However kages appeared o be weaker he shor-ru dyacs. S (200) argued ha prce reaoshps he shor-ru were o as cear as he og ru because he Chese fuures prces were s very sesve o oca facors. Soe of hose facors were () he doesc soybea suppy syse whose raway rasporao was very suscepbe o cac effecs; () he Chese agrcuura pocy whch peeed he Mu rce ocy (M) order o suppor he soybea farers ad esure sef-suffcecy for gras ad vegeabe os; ad () arke apuao due o he aco of specuaors because qudy of Chese fuures arkes was cpe durg her sape perod. RESEARCH METHODS rce kages bewee Cha U.S. Braz ad Argea soybea fuures arkes w be vesgaed wh coegrao echques ad error correco. U roo (ADF) es w be adoped o es for saoary of each prce seres ad Johase s coegrao w be used 4

6 5 o es he exsece of a og-ru reaoshp bewee he four seres. If he seres are foud o be coegraed a syse wh four equaos w be esaed as equaos () o (4) where USA CHN BRA ARG are day fuures prce chages he U.S. Cha Braz ad Argea respecvey ad ECT s he error correco er. s ARG r BRA q CHN p USA k USA ECT () s ARG r BRA q CHN p USA k CHN ECT 2 2 (2) s ARG r BRA q CHN p USA k BRA ECT 3 3 (3) s ARG r BRA q CHN p USA k ARG ECT 4 4 (4) The prce dscovery echas w be dscussed based o he forao shares deveoped by Hasbrouck (995). Ths fraework s based o he oo ha here are rasory ad perae copoes a syse of prces. The perae copoe s ypcay caed coo facor or coo effce prce ad forao shares ook a he proporo of he oa varace of he coo facor ha ca be arbued o each prce seres he syse. Hasbrouck forao shares (S) are cacuaed as equao (5) where represes he corbuo of arke o he varace of he coo facor ad represes he varace of he coo facor. The er correspods o he covarace arx of he se of prces ad refers o he su of he ovg average coeffces of he prce seres. (5) The er correspods o he varace of he copoe of prce varao ha s peraey pouded o he prce of a asse due o ew forao. The forao share of arke ( = ) s defed as he proporo of fro arke reao

7 o oa varace. Tha s he forao share correspods o he proporo of he oa varace of he coo facor corbued by a specfc arke. Hasbrouck s forao shares sar fro he esao of a error correco ode he decoposes he pac of a perurbao ad aocaes hs pac o he arkes. Ths procedure pes ha forao shares ca yed dffere resus depedg o he order of he prces he syse. I order o avod hs probe Le ad Shresha (2009) proposed a ew echque whch rees o decoposg he covarace arx based o he correaos bewee he seres. Ther procedure adops a rasforao of he orhogoazed arx used by Hasbrouck (995) whch s cacuaed as:. I suary represes a dagoa arx whose o-zero eees are he egevaues of a arx ha correspods o he ovao correao arx. The correspodg egevecors are grouped he cous of arx whe refers o a dagoa arx ha coas he ovao sadard devao s prcpa dagoa. Le ad Shresha (2009) approach provdes a sge forao share for each arke ha s depede ers of he orderg of prce seres provg he echque proposed by Hasbrouck (995). DATA Day soybea fuures prces were obaed fro Barchar ad he webses of he fuures exchages Braz (BM&FBovespa) Argea (Maba) ad Cha (Daa Coody Exchage). They are a cosg prces ad were covered o US$/bu. The sape perod goes fro 0//2002 o 2/29/20 (2004 observaos). The daa se s sp o hree subperods order o expore how rece chages eraoa rade ad fuures radg voue ay have paced prce ad voay reaoshps bewee he four arkes. The frs sub-perod goes fro Ocober h 2002 o Sepeber 29 h 2006 ad s characerzed by rsg Chese pors of soybeas bu s ow radg voue of soybea fuures coracs a he DCE. The secod sub-perod goes fro Ocober 9 h 2006 o Deceber 30 h 2008 whe Chese pors of soybeas coued rsg ad here was arge creases he radg voue of he DCE soybea fuures corac. The hrd sub-perod goes fro Jauary 5 h 2009 o Deceber 29 h 20 durg whch Chese pors kep a srog growh bu he fuures radg voue a he DCE dropped sharpy. A pora po hs sudy s he dfferece radg hours across he four fuures exchages. Tradg sessos oca e ru fro 9:30 a o :5 p he U.S. (CME Group) 9 a o :30 a ad :30p o 3p Cha (DCE) 9a o 2:5 p Braz (BM&FBovespa) ad :30 a o 3:5 p Argea (Maba). Braz ad Argea are he sae e zoe whch s hree hours ahead of he U.S. However he e dfferece vares durg he year accordg o daygh savgs e each of he hree coures. Cha s fouree hours ahead of he U.S. ad eeve hours ahead of Braz ad Argea. Te dffereces bewee Cha ad he oher coures aso vary durg he year because of daygh savgs e Braz Argea ad U.S. (Cha does o adop daygh savgs e). Tabe I (Appedx) usraes he e dffereces bewee radg sessos. 6

8 RESULTS The saoary ad coegrao ess showed ha he four prce seres are frs-order egraed ad coegraed for he whoe perod ad aso for each sub-perod. I fac Johase s es dcaed he presece of wo coegrag vecors for he whoe perod ad oe coegrag vecor for each of he sub-perods. Graphs wh he four prces seres eve (Fgure II) ad frs-dfferece (Fgure III) are preseed he Appedx. Frs a error correco ode (ECM) was esaed for he whoe perod ad esaed coeffces are preseed Tabe 2 2. Resus show ha he esaed coeffces of he error correco er (ECT) are sascay dsgushabe fro zero for a coures bu Argea dcag ha U.S. Braz ad Cha parcpae he aduses o shocks her og-ru equbru reaoshp. The agudes of he esaed coeffces of he ECT sugges ha U.S. prces adus ore rapdy ha Braza ad Chese prces bu he dffereces he speed of aduse appear o be sa. The esaed coeffce of agged prce chages show xed resus. There appears o be ore eraco bewee U.S. Braz ad Cha bu Argee prces do o appear o erac wh he oher hree arkes. Thus ECM resus sugges reavey sroger shor-ru dyacs bewee U.S. Braz ad Cha wh e parcpao of Argea. Tabe : Esaed error correco odes for he whoe perod. Idepede Depede varabes varabes usa ch bra arg Cosa *** (-3.35) 0.00 (0.50) *** (-2.73) 0.02 (.599) ECT *** (-3.275) 0.02** (2.255) 0.020** (2.063) (-0.296) ECT *** (3.823) (-0.845) 0.005* (.875) (-.53) usa *** 0.229*** 0.200*** 0.09 (2.67) (7.734) (6.63) (.052) ch *** 0.048** 0.07 (-0.256) (-5.059) (2.48) (.232) bra *** (-0.963) (-0.75) (-3.622) (-.447) arg *** (-.229) (3.869) (-0.773) (0.204) Noe: sascs pareheses; sgfcace eve: *** %; **5%; *0%. ECMs were furher esaed for hree sub-perods deered by parcpao of Cha eraoa rade ad Chese fuures radg acvy. Resus for each sub-perod are preseed Tabe 2. I he frs sub-perod he esaed coeffces of he ECTs are sascay dsgushabe fro zero he U.S. Braz ad Argea equaos bu o he Cha equao. I he secod ad hrd sub-perods sasca sgfcace of he ECT eerges oy he Cha ad Braz equaos. Ths fdg dcaes ha Chese prces sared parcpag he og-ru aduse process oy he secod sub-perod suggesg a sroger eraco bewee Cha ad he oher arkes has deveoped sce Ths coser coeco bewee Chese prces ad oher prces gh be a cosequece of Cha s growg voues of soybea pors ad he sroger deveope of fuures radg a DCE sce he d-2000 s. The esaed coeffces of agged prce 2 The ag srucure was seeced based o he SBC. 7

9 chages offer xed resus aga bu appear o sugges ed shor-ru eraco bewee prces. The U.S. ad Argea equaos show e sasca sgfcace of agged prce chages a sub-perods. I he Cha ad Braz equaos U.S. prce chages are sascay dsgushabe fro zero a sub-perods bu here s e o o sgfcace he oher varabes. Tabe 2: Esaed error correco odes for he hree sub-perods Idepede Depede varabes varabes usa ch bra arg Frs sub-perod Cosa ** (-3.2) 0.03 (.393) 0.094*** (3.200) * (-2.280) ECT ** (-3.260) 0.0 (.34) 0.037*** (3.87) -0.07* (-2.334) usa - 0.6* 0.29*** 0.04** (2.405) (4.736) (2.28) (-0.63) ch *** 0.4*** (0.45) (-4.074) (3.577) (.02) bra *** 0.025* arg - (-.264) (-0.459) Secod sub-perod Cosa 0.00 (.429) ECT (.395) usa (0.048) ch (-0.454) bra (0.302) arg (-0.798) Thrd sub-perod Cosa 0.03 (.429) (.224) 0.220** (3.29) * (-3.240) 0.093*** (3.235) 0.295*** (2.874) -0.55*** (-3.062) (-0.49) 0.287* (2.588) (-3.698) 0.4* (.805) * (-4.897) 0.08*** (4.882) 0.268*** (2.556) 0.05 (0.026) (-.6) -0.2 (-.492) 0.699*** (3.240) 0.787*** (4.897) ECT *** 0.073*** (.395) (3.235) (4.882) usa * 0.25* (0.048) (2.874) (2.556) ch * (0.454) (-2.862) (0.026) bra * * (-2.302) (-0.49) (-3.6) arg (-0.798) (.588) (.492) Noe: sascs pareheses; sgfcace eve: *** %; **5%; *0%. (-.895) (0.740) (-.529) (.575) (-0.673) 0.09 (0.368) 0.05 (0.57) 0.06 (0.23) (.375) 0.08 (.229) (0.673) (0.368) (-0.57) (-0.23) I ers of forao shares (IS) he orga easure proposed by Hasbrouck (995) eads o upper ad ower bouds pyg IS are orderg depede. However he easure proposed by Le ad Shresha (2009) provdes a uque vaue for forao 8

10 share whch hey caed odfed forao share (MIS). The MIS were cacuaed for he whoe sape perod defed hs sudy ad are preseed Tabe 3. Overa he MIS dcaes ha Cha was resposbe for 50.86% of he prce dscovery process foowed by U.S. wh 32.59%. Argea ad Braz preseed sa perceages. These fdgs sugges ha Chese prces are resposbe for approxaey haf of he varace of he coo facor bewee he four arkes.e. he prce dscovery process he soybea arke s doaed by Cha. These fdgs are cosse o hose repored by Lu ad A (2009) for Chese ad U.S. arkes. Tabe 3. Modfed Iforao Share MIS Marke MIS (%) U.S Cha Braz 5.55 Argea.00 CONCLUSIONS Ths paper aed o vesgae soybea fuures prce kages bewee Cha U.S Braz ad Argea over he pas e years. I parcuar hs research was o expore how he creasg parcpao of Cha he soybea eraoa rade ad he growg radg voue Chese fuures arke gh have paced prce reaoshps bewee he four a payers he soybea arke. Resus of he coegrao aayss ad error correco ode esao sugges ha Chese prces parcpae he aduse o he og-ru equbru bewee he four arkes ad aso he shor-ru dyacs. There s aso evdece of sroger kages bewee Chese prces ad prces he oher hree arkes afer The fdgs appear cosse wh he dea ha he growg Chese parcpao eraoa rade ad he deveope of s soybea fuures corac gh have creaed a coser coeco bewee prces Cha ad oher arkes. Oe chaege hs research es dffere e zoes where soybea fuures prces are raded (Tabe I Appedx). Resus preseed hs paper were obaed wh cosg prces each fuures exchage ake o he sae day. However Chese cosg prces o a gve caedar day are kow before fuures radg sar U.S. Braz ad Argea o he sae caedar day. I reas o be expored wheher prce kages coud dffer fro he curre resus f Chese cosg prces are ake o he ex caedar day copared o he oher hree prces or f Chese ope prces are used. Therefore oe of he ex seps of hs research s o cosder oher cobaos of ope ad cosg prces order o address he arge e dffereces bewee he four fuures arkes. Fay a furher sep hs research w be he vesgao of correaos ad voay spovers bewee he four aor payers whch w rey o he dyac codoa correao - GARCH fraework proposed by Ege (2002). 9

11 REFERENCES BM&FBOVESA A Nova Bosa. Avaabe a: hp:// 20. CME Group Chcago Mercae Exchage. Avaabe a: hp:// 20. DCE - Daa Coody Exchage. Avaabe a: hp:// 20. Dckey D.; Fuer W. Dsrbuo of he esaors for auoregressve e seres wh a u roo. Joura of he Aerca Sasca Assocao Vo. 4 pp Avaabe a: hp:// Ege R.F. Dyac Codoa Correao: A Spe Cass of Muvarae Geerazed Auoregressve Codoa Heeroskedascy Modes. Joura of Busess ad Ecooc Sascs Vo. 20 pp FIA Fuures Idusry Assocao. Avaabe a: hp:// 20. Gozao J. ad C. Grager. Esao of Coo Log-Meory Copoes Coegraed Syses. Joura of Busess ad Ecooc Sascs Vo. 3 pp Hasbrouck J. Oe Secury May Markes: Deerg he Corbuos o rce Dscovery. The Joura of Face Vo. 50 pp Johase S; Juseus K. Maxu Lkehood Esao ad Iferece o Coegrao wh Appcaos o he Dead for Moey. Oxford Bue of Ecoocs ad Sascs Vo. 52 pp Le D. ad K. Shresha. A New Iforao Share Measure. The Joura of Fuures Markes Vo. 29 pp Lu Q.; A Y. rce Dscovery Iforaoay Lked Markes: Evdece Based o No-Sychroous Tradg Iforao. aper preseed a he 49 h Aua Meeg of he Souhweser Face Assocao Daas Texas March Margardo M.A; Turoa F.A.; Bueo C.R.F. The word arke for soybeas: prce rassso o Braz ad effecs fro he g of crop ad rade. Nova Ecooa Beo Horzoe Mao/Agoso Vo. 7 pp Avaabe a: MATba - Mercado a Téro de Bueos Ares. Avaabe a: hp://

12 S W. Cha's Soybea Fuures Corac: Cha's Iegrao wh he U.S. Soybea Fuures Marke. M.S. hess Orego Sae Uversy Orego Ued Saes UN COMTRADE Ued Naos Coody Trade. Avaabe a: Zhao Y. M. Yag Y. Zhag ad C. Q. Ipac o he Chese soybea arkes fro eraoa prces voay: Eprca sudy based o VEC ode. Afrca Joura of Agrcuura Research Vo. 5 pp

13 AENDIX Fgure I. Voue of soybea fuures coracs a he Daa Coody Exchage DCE (Cha) Fgure II. Day soybea fuures prces over e (US$/bu) 2

14 Fgure III. Day soybea fuures prce chages (%) 3

15 Tabe I. Dffereces Te Zoes Braz Argea U.S. Cha Sae e zoe Braz - + 3hs (+/- h DST) - hs (+ h DST) (+/- h DST) Argea - + 3hs (+/- h DST) - hs (+ h DST) U.S hs (+ h DST) Cha - *DST = daygh savg e. 4