Journal of Business & Economic Policy

An Intervention Analysis on the Relationship between Futures Prices of Non-GM and GM Soybeans in China
Nanying Wang and Jack E. Houston

Abstract
In 2004, the Dalian Commodity Exchange (DCE) introduced a separate futures contract for No. 2 soybeans, which includes GM soybeans. With this change, the No. 1 soybean futures contract defaulted to a non-GM contract. We define the difference between the prices of non-GM and GM soybeans as the price premium for non- GM soybeans. An intervention analysis is used to test the effects of the events on the price premium. We investigate three events—two contract specification changes in 2005 and 2010 and one grain law implementation in 2012—focusing on both the direction and size of their impacts. In conclusion the contract specification changes did affect the price premium. It is also found the law issue has permanently increased the price premium. Studying the market response linkages between the two soybean futures markets is helpful for understanding whether the newly opened GM soybean futures market transmits price information effectively.

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