December 23, 2005

More warehouses may help China's Dalian GMO soybeans trade

The Chinese government has agreed the Dalian Commodity Exchange could set up new delivery warehouses for imported soybeans in three cities, in a move that could facilitate trading of genetically modified soybean futures contracts on the exchange.

An exchange official said Friday that they would soon announce the warehouses that are ready for GMO soybean delivery. However, he was unable to confirm the number or names of the warehouses.

The General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ, has recently given the Dalian exchange the go-ahead on setting up of delivery warehouses for GMO soybeans in Nantong, Jiangsu province, Rizhao, Shandong province, and Shenzhen, Guangdong province, according to the exchange.

Previously, delivery of imported GMO soybeans must be made in Dalian, Liaoning province, a rule that had discouraged traders and crushers in other regions, especially in the southern coastal provinces, to participate in trading of the No. 2 GMO soybean futures contracts.

China does not plant GMO soybean crops, and imported GMO soybeans are closely monitored after their arrival and until they are crushed into soyoil and soymeal.

Soybean crushers in eastern and southern China would have greater incentive to trade the No. 2 soybean contracts due to lower delivery costs, thanks to closer proximity to the new delivery warehouses, some local analysts said.

Trading volume and open interests in the No. 2 contracts have been mostly minimal since their launch in December 2004, but they have picked up slightly in mid-November amid talk of more delivery warehouses in other regions.

The benchmark No. 2 September 2006 soybean contract ended the morning session Friday RMB60/tonne higher at RMB2,763/tonne on more active-than-usual speculative buying, while the benchmark May 2006 contract for non-GMO soybeans, the most actively traded soybean contract on the Dalian exchange, inched up RMB1/tonne to RMB2,757/tonne.

Trading volume in all No. 2 GMO soybean contracts has so far increased 15.7 percent on-year to 264,658 lots in December, with open interests rising 23.5 percent to 26,120 lots.

Meanwhile, trading volume in all non-GMO soybean contracts has decreased 19.3 percent to 5,042,450 lots so far this month, and open interests have increased 19.2 percent to 500,920 lots, according to data from the Dalian exchange.