ABSTRACT
The prosperity of wheat trading in the world’s major commodity futures markets has provided an effective channel for market participants to hedge price risks and ensure profits (Yang and Leatham, 1999). If the futures market is efficient, price will reflect the equilibrium level in the spot market, and will help the formation of a rational market expectation of price in both the short run and the long run. China is the biggest wheat production and consumption country in the world (USDA, 2004). Wheat production, consumption and trade account for a major share of China’s food system. In 2002, the share of wheat in all grains is 27.0 percent, 28.9 percent, and 32.9 percent for production, consumption, and imports, respectively.
