.jpg)
For the functioning of the futures market and to guarantee the income of rural residents and solve the storage, grain selling and financing issues of rural residents in producing areas, Dalian Commodity Exchange (DCE) has come up with a new idea. On January 25, DCE issued a notice on piloting the “New Grain Bank”.
According to the Notice, corn is the pilot product of the “New Grain Bank” business, and the pilot application entities are corn delivery warehouses in the four northeastern provinces, including single delivery warehouses, group delivery warehouse’s sub-warehouses and extended warehouse areas. The pilot time is from February to April, 2019.
The main business mode of the “New Grain Bank” is follows: peasants store grain in grain purchasing and storage companies, and the latter will issue a voucher and offer such business as storage and drying; in the agreed time, peasants can pick up their grain or settle the payment with the voucher; and relevant storage and drying fees will be exempted if they choose to sell the grain to the companies. Some qualified companies can offer collateral loan, and peasants can manage relevant collateral loan business with the voucher at the financial institutions in cooperation with the companies. The grain purchasing and storage companies can make hedging strategies by futures, options and other instruments to avoid price fluctuation risks.
The “New Grain Bank”, the upgraded version of the “Grain Bank” business, is a new exploration of guaranteeing peasants’ income through futures and options by DCE after the pilot programs of “insurance + futures”, over-the-counter options and basis trading. Compared with the traditional “Grain Bank”, the grain purchasing and storage companies involving in the “New Grain Bank” business can provide peasants with floor price guarantee, secondary pricing and other price guarantee and, at the same time, enhance its continuity by transferring and dispersing risks through the futures market. In addition, the introducing of the collateral financing service will help to solve rural residents’ expensive financing difficulty.
A spot enterprise’s official said that the “New Grain Bank” business can guarantee rural residents’ grain-growing income and also benefit grain purchasing companies, thus achieving a win-win result. After the adjustment of the corn temporary storage policy in northeast China, relevant enterprises have successively established factories there, which have aggregated the grain competition. Enterprises can lock in grain supply in advance through the “New Grain Bank” business and manage operational risks by futures, options and other risk hedging instruments, thus expanding the trading volume and production scale and enhancing their position and influence in the industry.
Relevant agricultural expert believed that the “New Grain Bank” business is of great significance to serve the national strategy and optimize the market resource allocation. On the one hand, the pilot “New Grain Bank” business will help to further exploit the internal energy of rural areas and facilitate the integrated development of the first, secondary and tertiary industries. The benchmark effect of this pilot business will lead more enterprises to take part in the purchase, storage, logistics, deep processing and relevant trading in northeast producing areas, leverage more social capital to agriculture and rural areas, and extend the agricultural industry chain and increase agriculture’s additional value. Meanwhile, this pilot business can leave some benefits to the producing areas and peasants, thus guaranteeing peasants’ income through more channels and better serving the rural revitalization strategy. On the other hand, the “New Grain Bank” business will help to activate the warehousing facilities in producing areas and increase the resource utilization efficiency. As the continuous delivery of grain from storage after the adjustment to the purchasing and storage policy, the warehousing facilities of over 200 million tonnes can be available for use. The “New Grain Bank” business will guide rural residents to store grain in companies and thus increase the utilization efficiency of local warehousing facilities.
