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The “11th International Corn Industry Conference” was held on September 12. Wang Fenghai, CEO of Dalian Commodity Exchange (DCE), said at the conference that DCE is to speed up the launch of corn options to provide enterprises with abundant and more flexible risk management instruments and trading strategies and better serve the rural revitalization strategy and the supply-side structural reform in agriculture. Currently, relevant preparations on contracts, rules and systems have been ready and DCE has been conducting market cultivation. Meanwhile, it will promote the listing of hog futures to improve the feeds and breeding risk-avoiding chain and strive to provide more risk management instruments for the hog breeding industry.
This year marks the 25th anniversary of the listing of corn futures. Corn futures was listed in 1993, de-listed in 1998, re-listed in 2004 and has been on the right track of sound and stable development since then, which has served the grain marketing system reform, the purchase and storage system reform and the supply-side structural reform in agriculture in China. The 25-year tortuous development has been an arduous course of the Chinese futures market to keep exploring and forge ahead and has fully demonstrated DCE’s aspiration and ambition of serving the entity economy and national strategies.
Wang Fenghai said that corn is a kind of grain with the largest output in China, whose output and consumption have both exceeded 200 million tons in recent years. The corn industry has been the focus of China’s industry policy adjustment, especially since the implementation of the purchase and storage system reform in 2016 which has led to great changes in market fundamentals, continuous decrease of upstream corn cultivated area, and the new pattern of “shipping northern grain to the south” and “breeding southern hogs in the north” in the downstream feeds and breeding industry. Besides, great fluctuation has been seen in corn price and the risk-avoiding demand of agricultural business entities has increased sharply. The achievements of corn futures can be summarized as follow:
First, a series risk-avoiding chain related to corn futures has been formed. The egg futures and corn starch futures successively listed after 2013 are closely related to corn futures and have further expanded the scope of serving “agriculture, rural areas and rural residents”. In particular, corn and corn starch have constituted the corn deep-processing risk-avoiding chain; corn, soybean meal and egg have formed the feeds and breeding risk-avoiding chain. From January to August of 2018, the trading volume and open interest of futures products in these two chains accounted for 71% and 72% respectively in all DCE agriculture futures. At present, all large trading companies in the corn industry chain, 50% of the top 30 feeds enterprise (groups) in China, and 75% of corn starch processing enterprises have made use of corn futures to avoid price fluctuation risk in spot business. The corn-related risk-avoiding chains have made corn futures one of the products in China whose functions have been fully displayed.
Second, the market operating efficiency has been lifted remarkably. To get close to spot trading, DCE has implemented the group delivery system on corn futures and expanded the delivery area from Liaoning Port to three provinces and one district in Northeast China, which have further reduced companies’ delivery cost and serve the national purchase and storage system reform. Besides, it has further implemented the futures dealers system and added calendar spread arbitrage contracts, making the near-month contracts of corn futures more active and bringing convenience for industry clients to continuously hedge in the futures market.
Third, the industry service capacity has kept increasing. To explore an effective way to guarantee rural income, DCE joined hands with relevant futures companies and insurance companies to develop the “insurance + futures” mode in 2015, which was written in the No. 1 Central Document for 3 consecutive years. In 2018, DCE is to further strengthen the efforts to support this mode (with the budget of RMB 300 million) and has launched various business modes, including the “insurance + futures”, the over-the-counter options and basis trading, and the “Rural Income Guarantee Plan” involving futures companies, securities companies and banks, which have been well received by various institutions. Up till now, 92 projects have been registered and 69 of them involve corn products.
