ABSTRACT
Wheat production, consumption and trade account for a major share of China's food system. In 2002, wheat production and consumption reached 93.87 and 108.74 million tons respectively, about 27.0 percent and 28.9 percent of all grain1 production and consumption. Wheat exports and imports are 1.51 and 1.09 million tons respectively, about 12.6 percent and 32.9 percent of all grains exports and imports. Wheat price volatility also plays a very influential role in overall grain price volatility. The prosperity of wheat futures in world's major commodity futures markets has provided an effective channel for market participants to hedge price risks and insure profits (Yang and Leatham, 1999). If the futures market is efficient, price will move in a way to reflect its real equilibrium level in the spot market. Efficient futures prices help the formation of a rational market expectation of price in both the short run and the long run.
