The 14th China International Oils and Oilseeds Conference (CIOC), jointly organized by Dalian Commodity Exchange (DCE) and Bursa Malaysia Derivatives (BMD), is held in Guangzhou on November 7. Xi Zhiyong, DCE Deputy Party Chief and DCE CEO, says in the speech that DCE will closely focus on serving the real economy and the national strategy to build a first-class diversified and open derivatives exchange in the world and offer high-quality service for the oils and oilseeds industry.
Xi says that China has transformed from a major soybean producer to a major soybean importer since the implementation of the opening-up policy, and one little soybean has witnessed the tremendous change in the reform and opening-up of China and borne the exploration and practice of DCE in serving “agriculture, rural areas and peasants” and the real economy. The development from the soybean futures at the very beginning of DCE to the classification of No. 1 soybean and No. 2 soybean futures shows the change from the domestic orientation of soybean crushing materials to the import orientation; the process from the research and listing of soybean meal futures to its growing into the agricultural futures with the largest trading volume in the world reflects the transformation and upgrading of the Chinese protein consumption structure; the development from the listing of only soybean oil futures to the listing of soybean oil and RBD palm olein futures reflects the diversified development of the oils consumption structure; and the change from oils and oilseeds futures to relevant options products and from standard floor-traded products to over-the-counter instruments, products and services demonstrates an increasingly mature derivatives market in China.
It is learnt at the CIOC that DCE’s soybean derivatives family has kept expanding since the listing of agricultural futures like soybean in 1993 and gradually realized the integration of the industry chain from raw materials and processing to feeds and the diversification of derivatives instruments including futures, options, swaps and indexes, making it an important carrier of building DCE into a first-class open and diversified derivatives exchange in the world.
Xi believes that the commodity derivatives market system is like a tree, with spot goods as its root, futures the trunk, and instruments like options, indexes, swaps and basis trading the flourishing branches and leaves. To grow it into an exuberant and deep-rooted tree with strong trunk, DCE has made the following efforts since 2012. The first is adhering to innovation and gradually establishing and improving the floor-traded derivatives instrument system. In 2017, DCE listed soybean meal options, the first commodity options in China, and issued the first commodity futures ETF and 16 products, including bank structural deposits and wealth management, securities traders’ income voucher, futures asset management plan and index insurance. The second is exploring the over-the-counter market and constructing a multi-layered derivatives market structure where the floor-traded market and over-the-counter market are interconnected. Up till now, DCE has rolled out various types of commodity swaps business, including the calendar spread and intercommodity spread with No. 1 soybean, soybean oil and soybean meal futures price indexes as the underlying, which have provided convenience and security for industrial enterprises to manage price risks more accurately. The third is optimizing rules and systems, increasing market operation efficiency, and promoting futures-spot integration. It has initiated the dynamic premium and discounts system for soybean oil futures, which has innovatively solved the premium and discounts difficulty of delivery warehouses in South China; and it has optimized the soybean delivery quality standards and adjusted and improved the delivery system in Heilongjiang producing area, which has brought convenience for enterprises in producing areas to involve in physical delivery. The fourth is taking roots in the industry base and keeping innovating market service modes and methods. It has initiated and kept expanding the “insurance + futures” pilot for soybean and other products and explored to secure the income of peasants and agriculture-related enterprises in marketized ways. On the basis of previous pilots, DCE has rolled out the “Peasants Income Guarantee Plan” and the “Corporate Risk Management Plan” with wider coverage and more participants and made use of “insurance + futures”, over-the-counter options and basis trading to provide industrial enterprises with the whole industry chain risk management service from planting to trading and processing.
After years of development, DCE has become the largest soybean meal, soybean oil and RBD palm olein futures market in the world. From January to October this year, over 500,000 clients took part in DCE’s oils and oilseeds derivatives trading, among which some 8,500 were corporate clients; the total trading volume of oils and oilseeds futures and options of DCE was 382 million contracts (unilateral, the same below), with the average daily trading volume of 1.8983 million contracts, the average daily trading turnover of RMB 66.068 billion, and the average daily open interest of 2.8015 million contracts. The trading volume and open interests accounted for 40.72% and 43.22% respectively of the domestic agricultural futures market, offering sufficient market liquidity for clients’ hedging and asset allocation.
Xi stresses that the trading scale is just a figure while the functions are the essence. Benefited from the wide participation of domestic industrial clients and overseas grain dealers, DCE’s oils and oilseeds section has become the agricultural futures and options with the best industrial representativeness in China and the key basis for DCE to actively take part in the modern market system construction and facilitate the agricultural modernization. At present, the basis pricing of “DCE futures price + premium and discount” has gradually been widely adopted in the oils and oilseeds industry, providing industrial enterprises with more timely and more efficient pricing standard and profoundly changing the traditional “buy-it-now” pricing mode and trading convention. Besides, large grain and oils enterprises at home and abroad and over 90% of soybean processing plants have deeply involved in the DCE market to make effective risk management. In particular, since 2018, the soybean industry in China has remained calm and got fully prepared in the face of the changeable international trade situation and the complicated situation like the African swine fever, and it has made use of the derivatives market to lock profits and avoid risks, effectively maintaining the national grain security.
He says that DCE will, under the leadership of China Securities Regulatory Commission and in accordance with the requirements of the four awes (stand in awe of the market, rule of law, professionalism and risks) and one joint force (The capital market’s development needs all the efforts made by all sides), stick to the principle of “consolidation, enrichment and improvement” and strive to serve the better development of the oils and oilseeds industry. First, it will actively facilitate the opening-up of the oils and oilseeds derivatives market and allow the direct trading of overseas traders in RBD palm olein, soybean meal and soybean oil through QFII and RQFII, thus further increasing the international representativeness and influence of DCE prices. Second, it will accelerate the listing of oils and oilseeds options and accelerate the research, development and listing of soybean oil and RBD palm olein options to provide industrial enterprises with more risk-avoiding instruments. Third, it will increase the efficiency of the oils and oilseeds market and make relevant contracts more close to the changing import soybean source structure of the spot goods by such measures as adjusting the delivery quality standards and delivery premiums and discounts of soybean meal and soybean oil.
The theme of the 14th CIOC is “Opening, Win-Win, Innovation, Integration”, and the keynote speeches focus on 9 topics of market concern, such as “New Development Pattern and New Challenges of Soybean Crushing Enterprises in the New Era” and “Sticking to Exploration and Innovation for Industry Development”. And two forums on “Derivatives Instruments and Platform Innovation & Oils and Oilseeds Industry Development” and “2019/20 Oils and Oilseeds Market Development and Prospects” have been organized to interpret the hot issues in the industry.
