China, the world's top soya importer, has delayed launching future contracts for genetically modified (GMO) soyabeans due to technical problems, a Dalian Commodity Exchange official said on Thursday. But he was hopeful the China Securities Regulatory Commission would approve the number two soya contracts to begin trading in December. Quarantine authorities were working with the commission on details of the contracts, he said.
He gave no further details. Last month, an official at the exchange said it was working towards a start in GMO soya contract trade on November 18, which would add to existing non-GMO soya contracts.
It would be the fourth launch of commodity futures in China since a crackdown on derivatives in the late 1990s. Dalian rolled out corn futures in September, while Shanghai listed fuel oil contracts in August and Zhengzhou cotton futures in June.
Soya traders and industry officials said GMO soya contracts faced more difficulties than other contracts as Beijing did not want to give up controls on imports, for the sake of Chinese farmers who grow non-GMO soyabeans.
While China imposes no quantitative limits on soya imports as is the case for imports of vegetable oils or grains, international suppliers need to get import permits for each soya cargo and only crushers are allowed to import the oilseed.
Asked if there would be limits on trade in GMO soya contracts, the exchange official said while all exchange members were allowed to trade in the contracts, only crushers approved by quarantine authorities could take physical deliveries.
"CIQ (quarantine authorities) will follow and monitor those GMO soyabeans. And only qualified crushers who can process the soyabeans are allowed to take the goods away," he said.
"Investors can sell and buy the contracts, instead of taking the goods." The Chinese crushing industry, which has a total annual capacity of more than 60 million tonnes, needs to buy the raw material from abroad because there are only 8 million to 9 million tonnes of domestic non-GMO soyabeans available for crushing each year.
China allows only three-grain firms to hedge with Chicago futures.
Asked about the GMO soya contracts, a manager at Longbow Xinlong Edible Oil Co Ltd said: "It would help. We could hedge our position after purchasing soyabeans. But we are not sure how CIQ is going to interfere."
Some traders said there was also confusion as Beijing wanted to see higher value for domestic non-GMO soyabeans, though domestic soya fetched lower prices than imported GMO seeds due to its smaller oil and protein content.
Shinsuke Toukai, president of Dalian Nisshin Oil Mills Ltd, told Reuters: "For crushers, what counts is the oil and protein content. We would not buy Chinese beans unless it's 100-200 yuan ($12-$24) a tonne cheaper."
Yet the contracts might prove useful if Beijing floats the yuan against the dollar as the contracts denominated in yuan would allow crushers to hedge the currency risk, the official said. "But it would be best if they list soyaoil contracts. We are using Chicago, as there are no oil futures in China. We do not feel a strong need for the GMO soya contracts. For our raw material procurement from abroad, we use Chicago for hedging," he said.
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