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China commences soybean futures trading

19-Jan-2005

Related topics: Business

China is continuing its moves to liberalise trade and facilitate economic growth, and food producers have this month been given a particular boost with the start of futures trading for imported soybeans, reports Anand Krishnamoorthy.

China is a leading importer of soybeans from major producing countries such as the US, Brazil and Argentina, with the vast majority used to produce soybean oil. In the first eleven months of 2004, China imported 18 million tons of the crop.

Soy prices reached a 15-year high in 2004 after poor harvests- and an increase in Chinese imports as a result of its own shortfalls in production - led to a drawdown in global stocks.

 

Futures trading allows soybean growers and processors to hedge against this price volatility and keep costs down.

 

The Dalian Commodity Exchange in the north east of the country is the first of China's three commodity exchanges to commence soybean futures trading, and some 200 million tons of the crop are expected to be traded through the exchange in 2005.

 

A bumper harvest in the US is, however, expected to keep soybean prices low this year.

 

Soybeans are not the first crop to see futures trading in China. Earlier last year, the Chinese regulators permitted other agricultural commodities such as cotton and corn to benefit from futures trading, part of an ongoing liberalisation of the market as it seeks to develop its economy following accession to the World Trade Organisation in 2001.

 

More commodities, such as sugar, are expected to be introduced to the three commodity exchanges in the near future.

 

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