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The China Securities Regulatory Commission (CSRC) held a press conference on July 5 to announce its approval of the listing of polished round-grained rice futures at Dalian Commodity Exchange (DCE) on August 16, 2019. The polished round-grained rice futures is another important agricultural product launched by DCE. Industry insiders believe that polished round-grained rice futures will play a positive role in assisting enterprises in dealing with price fluctuations and improving the trade pricing system.
The polished round-grained rice is rich in protein, comprehensive amino acid, fat, calcium phosphorus, Fe, b-vitamins and many other necessary nutrition constituents. It tastes soft and has been mainly used in edible rice and producing fuel ethanol and starch. It could also be used in animal feed (in replacement of corn and wheat) to provide energy.
China is the largest polished round-grained rice producer and consumer in the world. From 2010 to 2018, the average annual increase of polished round-grained rice output in China was 4.5%. In 2018, the output of polished round-grained rice in China were 47 million tonnes, taking up 68% of the total output in the world; and the consumption was about 42 million tonnes, accounting for 61% of the total consumption in the world. The polished round-grained rice processing has presented obvious regional features as affected by the planting areas. The Northeast and Jiangsu Province are the two major polished round-grained rice producing areas in China. In recent years, rapid development has been seen in the polished round-grained rice producing in the Northeast, with the total output in Liaoning, Jilin and Heilongjiang (the three provinces in northeast China) exceeding 50% of the total in China. Traditionally, the polished round-grained rice consuming areas are mainly in northern China. With the continuous deepening of urbanization and the frequent movement of population, increasing consumption of polished round-grained rice has been seen in eastern coastal areas (mainly Jiangsu, Zhejiang and Shanghai), and some areas in Central and South China. Currently, North China, East China and Northeast China are the main consumption areas, with the total consumption approaching nearly 80% of the total.
The polished round-grained rice price, with the high marketization degree, has presented increasingly greater fluctuation year by year. According to the statistics on the factory prices of polished round-grained rice in Jiamusi (Heilongjiang Province) over the past three years by China National Grain & Oils Information Center, the bottom price was RMB 3,850 / tonne, and the top price was RMB 4,520 / tonne, presenting the price fluctuation of 17.4%. As the average net profit rate of the polished round-grained rice processing industry is around 2%, such a large price fluctuation have imposed great operational risks for relevant parties.
In this context, the listing of polished round-grained rice futures is of great significance to serving the round-grained rice processing, trading and consuming enterprises. With the gradual functioning of polished round-grained rice futures in price discovery, its futures price can accurately reflect its supply-demand change in China, thus providing enterprises with continuous, open and transparent price reference and optimizing the existing pricing mechanism. Besides, enterprises in the polished round-grained rice industry chain can engage in hedging through polished round-grained rice futures, thus effectively hedging against price fluctuation risks and improving their risk resistance and core competitiveness. As a result, these enterprises can focus on their daily operation and production, which will contribute to the long-term sound development of the whole industry. In addition, the polished round-grained rice futures will form joint forces with japonica rice futures, which will help to construct an improved risk management system for the whole industry chain and contribute to serving the “agriculture, rural areas and peasants” and the real economy.
A market participant says that the polished round-grained rice futures is of high standardization degree and presents active trading and a clear logistics direction, and its quality indicator system is clear for identification, which are favorable for standard futures contract trading. The rice processing enterprises in China are mainly in main rice producing areas, making it a highly raw grain-dependent industry. In recent years, the rice industry has gradually shifted to scale development. As the main polished round-grained rice producing area, Northeast China is the leading supply area for domestic polished round-grained rice trading, taking up 75% of the total trading volume in China. The polished round-grained rice trading pattern and trade flow are relatively centralized, with its trade from Northeast China to North China, East China and Northwest China accounting for about 60%, and its trade from Northeast China to South China, Central China and Southwest China about 40%. All these have made possible the listing of polished round-grained rice futures.
A DCE official says that on the basis of full research and demonstration, the contract and rules design of polished round-grained rice futures has been completed lately, the recruiting of delivery warehouses has been underway, and relevant business and technical systems are ready. Next, DCE will firmly advance relevant preparation and market cultivation before the listing to ensure the success launching and smooth listing of polished round-grained rice futures and provide relevant industry enterprises and investors with an open, fair and effective price-finding and risk-avoiding platform, thus boosting the development of the real economy.
DCE issues a notice on the same day to solicit market opinions on the contract rules of the polished round-grained rice futures. DCE has strived to meet the industry demand and the reality of spot trading, adapt to the futures market’s disciplines and enhance the practicability and operability of contract rules, with an aim of ensuring the functioning of polished round-grained rice futures. The polished round-grained rice futures adopts the international delivery standards and adds three indicators ( acid value, chalkiness degree and length-width ratio) according to the reality of its spot market. Besides, to ensure the storage and transportation safety of delivery products, the moisture indicator is designed to vary in different months. The polished round-grained rice futures will be physically delivered, adopting the standard warehouse receipt system and the mature delivery system for existing products. There are both factories and warehouses deliveries, and three delivery methods are available: EFP delivery, rolling delivery and one-off delivery. And its standard warehouse receipts will be deregistered after the delivery to ensure the quality of delivery products.
