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| Wen Shizhen, secretary of the Liaoning
Committee of the Communist Party of China, strikes the gong in
Dalian Commodities Exchange on September 22, announcing the
inauguration of corn futures trading. Corn transactions totalled
327,500 lots during the day, with a combined value of 3.95 billion
yuan (US$477 million). (newsphoto) |
Corn futures started
trading on the Dalian Commodity Exchange yesterday, with most contracts
falling on the first trading day under pressure from harvest
expectations.
Five out of six corn contracts fell yesterday, except the most active
January contract, which gained 11 yuan (US$1.3) to close at 1,191 yuan
(US$143.8) per ton.
Corn transactions totalled 327,500 lots during the day, with a combined
value of 3.95 billion yuan (US$477 million).
Analysts said that both the United States and China are expecting a
good corn harvest. Moreover, a planned government auction of corn stocks
later this week also put more pressure on the market.
Corn futures, the third new futures product listed in China this year,
is a long-expected new member of the food futures family in the country.
It is also a reflection of the recovery of the country's futures
market, which has hardly seen any new product over the past seven years
until this year.
Shang Fulin, chairman of the China Securities Regulatory Commission,
the securities and futures watchdog, said that the introduction of corn
futures has a deep impact on grain circulation system reform and the
stability of the overall grain market in China.
The commission gave approval to corn futures at the Dalian exchange in
August.
Earlier this year, it had given the green light to Shanghai and
Zhengzhou commodity exchanges to list fuel oil and cotton futures
respectively.
The world's second biggest corn consumer, China, has an annual corn
output of 120 million tons.
The demand for a risk hedging and price-discovering tool in the sector
has therefore been increasing rapidly, especially after China began reform
on the grain circulation scheme to make grain production and prices more
market-oriented, Shang said at the ceremony for the debut of corn futures
yesterday in Dalian, a port city of Northeast China's Liaoning Province.
He also said that it would take some time for the corn futures market
to become more stable and standardized, given the big quantity and
transaction of the product.
Shang urged the exchange and market participants to respect market
rules and place emphasis on risk control to nurture a good environment for
the market.
Corn futures are expected to directly benefit around 500 million
farmers in China and many corn trade companies, manufacturers and
distributors, analysts said.
It offers a risk hedging tool for food companies and also enhances
their competitiveness in overseas markets, said Liu Luxian, general
manager of Jiliang Group, a major foodstuff trade and futures company in
Northeast China's Jilin Province, the biggest corn production base in
China.
Jiliang will take part in the corn futures business actively and work
together with all participants to build a healthy market, he said.
Li Xigui, a researcher with the China National Grain & Oils
Information Centre, estimated the 2004 domestic corn harvest to be around
122.7 million tons, up 5.93 per cent from 2003.
More optimistic predictions of other agencies have put the figure at
between 123 to 125 million tons.
The harvest growth is expected to continue in 2005. But as consumption
of corn also grows rapidly, there will be a continuous shortage of supply,
Li said.
Meanwhile, the United States is also expecting a more than 8 per cent
increase in its corn harvest in 2004. Therefore, international corn prices
have been declining from a high point.
And a sharp decline in corn exports and expectations of stock auctions also further weighed down
corn prices in the domestic market since the beginning of the summer.
Li estimated domestic corn prices to rebound in the second and third
quarters of 2005, with the decline of corn stocks and a steady increase in
demand.
(Agencies) | 
Updated: 2004-09-23 10:50