Price Spillover Effects in U.S.-China Cotton and Cotton Yarn Futures Markets Under Emergency Events

Cheng Gui, Chunjie Qi (), Yani Dong and Yueyuan Yang
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Cheng Gui: College of Economics and Management, Huazhong Agriculture University, Wuhan 430070, China
Chunjie Qi: College of Economics and Management, Huazhong Agriculture University, Wuhan 430070, China
Yani Dong: College of Economics and Management, Huazhong Agriculture University, Wuhan 430070, China
Yueyuan Yang: College of Economics and Management, Huazhong Agriculture University, Wuhan 430070, China

Agriculture, 2025, vol. 15, issue 16, 1-28

Abstract: As a strategic material second only to grain, cotton serves both as a vital agricultural commodity and a key industrial crop. With the increasing frequency of global shocks and the deepening financialization of commodity markets, price linkages among major international cotton futures markets have strengthened. Consequently, in addition to fundamental supply and demand factors, cross-border price transmission has become a significant determinant of cotton pricing. This study employs daily closing prices of China’s cotton futures, cotton yarn futures, and U.S. cotton futures from 1 September 2017 to 31 March 2025 to examine the spillover effects among these three futures markets using time series models. The results reveal that U.S. cotton futures have dominated the Chinese cotton-related futures markets even prior to the onset of trade tensions, with strong domestic market comovements. However, both the U.S.-China trade war and the COVID-19 pandemic significantly weakened price co-movements while intensifying volatility spillovers. Although these external shocks enhanced the relative independence of China’s cotton yarn futures and modestly increased China’s pricing influence, U.S. cotton futures have consistently maintained their central role in price discovery.

Keywords: cotton futures; cotton yarn futures; price spillover effects; emergency events; U.S.-China markets (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2025
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