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On November 2, 2023, the 17th China International Oils and Oilseeds Conference (CIOC) & Agricultural and Livestock Industry (Derivatives) Conference, jointly organized by Dalian Commodity Exchange (DCE) and Bursa Malaysia Derivatives Berhad (BMD), with special support from the China Feed Industry Association (CFIA), took place in Dalian, China. Ran Hua, Chairman of DCE, stated in his address that DCE would continue to take various measures to enhance market efficiency and industry service capabilities, supporting the high-quality development of the oils, oilseeds, agriculture and livestock sectors.
Ran Hua mentioned that over the years, DCE has been consistently serving the real economy and international trade, while consistently maintaining regulated operations and steady development. Therefore, positive progress has been made in various fields.
First, DCE has enhanced risk prevention and control to ensure the effective functioning of the market. It has maintained a focus on the stable operation of the market, continuously analyzed and assessed market risks, and has been sensitive and enforced strict regulations, particularly concerning major commodity futures Building on effective risk management, DCE has, throughout this year, prudently and systematically adjusted the daily price limits and margin requirements for 15 different commodities, including futures of No. 1 soybean and No. 2 soybean, in response to market changes. It has also relaxed trading limits for four products including live hog. These measures are aimed to enhance market liquidity and meet the risk-hedging and value preservation needs of industry clients.
Second, DCE has advanced product innovation and optimized contracts to align with the actual needs of the industry. More specifically, DCE has worked on the development of new products and prepared for the launch of futures contracts for products such as pure benzene, logs, recycled steel raw materials, and ethanol. It has also worked with relevant ministries and industry associations on the development of spot indices. Additionally, DCE has optimized existing contracts based on industry needs, tailored rules, and delivery systems for various products like corn, iron ore, coking coal, and blockboard, optimizing the delivery of chemical products and making it easier for real economy-based enterprises to participate.
Third, DCE has actively explored the OTC market and deepened the integration of futures and spot markets. It has initiated activities related to warehouse receipt and basis trading, and established a commodity warehouse receipt registration center. Through these efforts, DCE has provided market services for a total of 285 trading firms and over 1,000 clients. This has laid the foundation for the initial development of three major sectors-agricultural products, raw materials for iron and steel, and energy and chemical industry, as well as an OTC trading center. In September this year, DCE introduced the EFP delivery platform, formally launching EFP trading services to cater to the diverse trading and hedging needs of industrial enterprises.
Fourth, DCE has diligently offered industrial services to enhance the market’s industrial participation. It systematically and purposefully enhanced its industrial services through activities such as “One-on-One with Leading Enterprises” and “DCE · Industrial Tours.” Making full use of the 107 industrial-finance bases to demonstrate and drive the model of businesses nurturing businesses, DCE has established a positive environment where established enterprises mentor and support smaller ones. Additionally, DCE continues to implement the “Enterprise Risk Management Plan,” supporting over 40 businesses this year in exploring the application of futures and derivatives tailored to their production and operation needs. Since early this year, the number of industry clients participating in DCE trading and the average daily open interests have increased by 18% yoy and 35% yoy, respectively.
Fifth, DCE has deepened its openness to the outside world and enhanced the influence of important bulk commodity prices. Since 2018 when it made iron ore futures available to overseas traders, DCE has expanded its openness to foreign investors across 11 futures and options products. A total of 14 different futures and options products are open to QFIs. Currently, traders from 29 countries and regions, including Singapore, Malaysia, Australia, and Hong Kong, have opened accounts and engaged in trading activities. Furthermore, DCE has worked with BMD to license soybean oil futures delivery settlement prices. This cooperation is expected to have a positive and far-reaching impact on the global oils and oilseeds market by promoting the integration of futures and spot markets.
According to introduction, the oils, oilseeds, and agricultural and livestock industries are one of the most mature and effective segments in DCE’s futures market, serving both the domestic and global industries. DCE provides comprehensive risk management tools for companies along the entire production chain, ranging from soybean cultivation and corn production to crushed, refined, and deep processing products (including soybean meal, soybean oil, palm oil, corn starch), husbandry products (such as live hog), and finally, food (such as eggs and japonica rice). In terms of external openness, DCE has fully opened up its oilseeds and oils sector, including futures and options of No. 1 soybean and No. 2 soybean, soybean oil, soybean meal, and palm oil, to the world. This move provides global oil and oilseed companies with more options to effectively manage risk by leveraging “two markets and two resources.” In terms of industry application, the “DCE futures prices + premium-discount” basis pricing model has become a common practice in the oils and oilseeds industry. Many of China’s top 20 live hog farming enterprises have actively participated in the live hog futures market in various manners.
Ran Hua emphasized that in the next steps, DCE will stay focused on serving the real economy and innovating to meet market demands. It will prioritize product innovation, technology-driven development, and ecosystem building and work with domestic and international market participants to further drive and innovate for the high-quality development of futures markets serving the oils, oilseeds, and agricultural and livestock industries.
First, based on the industry dynamics, DCE will continue to improve the quality of market supply. It will promote the launch of futures for commodities such as pure benzene, logs, recycled steel raw materials, and ethanol. In addition, it will focus on developing and introducing relevant spot price indices. It will also work on optimizing the rules and regulations of existing contracts that have already been listed, all aimed at enhancing the overall quality of market operations.
Second, DCE will promote the integration of futures and spot markets to enhance the effectiveness of market functions. Operating within the framework of legality, compliance, and controlled risk, DCE will strengthen its business collaborations with large-scale spot trading platforms that have a significant presence in the market and high levels of industrial client participation. This collaboration will facilitate industrial clients on the spot platforms to utilize futures and options prices for trade settlement. Consequently, this approach will help replicate various trading mechanisms such as basis trading, options trading, and agreement-based deliveries, promoting a broader application of futures prices in the market.
Third, DCE will encourage industrial participation and continue to drive market restructuring. It will achieve this by enriching trading instructions, introducing portfolio margins, enhancing hedging services, and improving the fundamental delivery system. These market mechanism improvements are aimed at further reducing costs and increasing efficiency for real-world businesses. DCE will also continue to enhance the engagement of industrial clients, increasing its support for leading companies in various industries.
Fourth, DCE will remain committed to the opening-up and strengthen its global market influence. Under the guidance of the CSRC, it will deepen the openness of specific products, expand the range of trading products available to Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors (RQFII)，and furthermore, DCE will continue to enhance its collaboration and communication with overseas institutions including BMD.
With a theme of “Seeking Progress for Win-Win Cooperation,” the Conference brought together industry experts from home and abroad to address many topics such as “China’s Food Security Strategy and Its Impact on the Grain and Oil Industry” and “Weather, Supply-Demand Variations, and Global Soybean and Corn Price Prospects.” The event also featured three sub-forums focusing on “Oils and Oilseeds,” “Feed Farming,” and “Corn Deep Processing” to better promote the functions of the futures markets of oils and oilseeds and agricultural and livestock products and to help companies manage risks through the integration of futures and spot transactions.
