To further adapt to the current domestic spot soybeans trading, reduce market delivery costs and enhance the capability of futures markets to serve agriculture, farmers and rural areas and real economy, DCE released the Amendments to “No.1 Soybean Futures Contract of Dalian Commodity Exchange” and “Detailed Delivery Rules of Dalian Commodity Exchange” on December 20, which adjusted the delivery quality standards and delivery packaging methods of No.1 soybean contract. The amended rules start from 1403 contract.
Under the amendments, the adjustment to the delivery quality standards for No.1 soybean contract mainly involves four aspects: First, the amendments contract the allowed complete grain rate of substitutes and the setting of premium and discount, such as rescinding the qualifications of grade five soybeans for delivery, setting discount for grade four soybeans and combining the premium regulations on grade one soybeans with grade two. Second, the premium and discount setting of impurity content is cancelled, and the impurity content of substitutes shall meet the requirements for standards; Third, the differentiate requirements for moisture content in different months are deleted, and a universal moisture indicator allowance is set, and premium and discount are adjusted meanwhile; Fourth, the allowance of damaged grain rate of substitutes is expanded, and corresponding premium and discount are added.
The adjustment to the delivery and packing manners of No.1 soybeans mainly includes two aspects: On the one hand, the delivery manner of No.1 soybean contract is changed into two ways: bagged or bulk grain. On the other hand, contract trading prices do not include packaging cost any longer, and packaging costs may be settled by buyers and warehouse party, and warehouse party may transfer it to sellers.
According to the introduction of the relevant officials at DCE, since the launch of soybean futures, their price discovery and hedging functions have effectively served the operation of market subjects, and played a positive role in the development of China’s soybeans industry. But in recent years, as great changes have happened in the soybean cash market, the current delivery quality standards for No.1 soybeans have deviated from the current spot trade circulation, and can not completely meet the demands of cash markets, and thus restricting market functions to a certain extent. It is therefore necessary to improve the original contract rules based on the new trends in cash markets. For instance, the low delivery standards for delivery substitutes prescribed in the original rules on No.1 soybean contract makes some No.1 soybean delivery goods deviate from current mainstream actual trading quality; the original setting of premiums and discounts is complicated and some original premium and discount standards deviate from the real conditions of actuals, making the premium and discount settlement between goods owners and delivery warehouses more complicated and difficult; there were many delivery substitutes previously, which makes it hard to introduce bulk grain delivery manner and is not conducive to reducing delivery costs. In terms of packaging manner, the original No.1 soybeans must be packed in jute bags when being delivered or put into a warehouse, but with the transformation of storage manners in cash markets from bagged package to bulk grain, relevant regulations need to be adjusted.
After this revision, the number of delivery soybeans varieties whose quality premium and discount need to be settled are reduced to 8 from 26, facilitating delivery costs settlement by clients. With packaging costs being excluded, the prices of No.1 soybean contract can reflect the prices of bulk soybeans, and help form clearer futures prices; the delivery commodities after adjustment are “popular” in markets at present, and the amounts of deliverable commodities can guarantee safe delivery; the uncertainty of the grades of delivery commodities received by buyers will be effectively reduced and extra delivery costs born by sellers will not increase; deliverable commodities stored according to varieties will greatly decline, and the pressure on warehouse capacity for bulk grain delivery may be effectively alleviated, and thereby creating conditions for the introduction of bulk grain delivery manner.
It is learned that in order to improve soybean contract rules based on the changes in the cash market, DCE began to do relevant researches at the beginning of 2010, and sent people to Heilongjiang, Shandong, Hebei, Jiangsu, Zhejiang and other soybean growth and production areas at a few occasions in 2011 and investigated more than 50 enterprises and institutions engaged in soybeans planting, processing, trading, storage & transportation and quality inspection. More than 300 soybean quality inspection reports have been collected and analyzed, and a few symposia have been convened to solicit market opinions on a large scale, thus forming the plan for adjusting and improving the current contract rules and delivery manners.
This revision is generally welcomed by the market participants. Spot enterprise insiders believe that these amendments will guarantee abundant delivery goods, make futures quality standards closer to actual spot trading, and make futures delivery objects clearer and prices more representative, as they contract the allowance of indicators, adjust corresponding premiums & discounts and further display the mainstream trading features of actuals. As a result, enterprise hedging will be greatly improved, thereby helping improve the level of futures markets in serving real economy. Market analysts point out that these amendments make the delivery quality of No.1 soybean contract much simpler and less uncertain, and help increase its liquidity.