Who has the final say?

Purpose – There is a distinct separation of price discovery from pricing power in China's sugar spot and futures markets. The purpose of this paper is to identify the reasons and provide plausible explanations for this stylized phenomenon. Therefore, the research may deepen the understandings of the operational mechanisms and internal efficiency of China's sugar spot and futures markets. Design/methodology/approach – The authors analyze the historical spot and futures price time series from China's sugar spot market and China's Zhengzhou Commodity Exchange (CZCE) within a co‐integration framework. Findings – It is found that China's sugar spot market has the pricing power, even though the futures market leads the spot market in price discovery. The phenomenon of observed separation of price discovery in spot market from pricing power in futures market may be caused by: irrational speculation in CZCE sugar futures market; oligopoly and local government politics; or the operational efficiency of the wholesale spot market, especially for its comparative advantages of information accessibility in the sugar producing areas. The results are compared with other empirical findings in many other commodities markets to obtain deeper understandings. Originality/value – The paper uncovers and provides the earliest econometric evidence of the observed stylized phenomenon and also provides plausible explanations for this phenomenon.