China aims to become pricing center for international non-GMO soybean trade
Last week, China’s security regulator approved listing of options on the Dalian No.1 soybean futures contract which represents domestic non-GMO soybeans.
While the derivatives will be useful for financial companies designing hedging products for farmers, state media is also touting their role in helping China becoming a pricing center for global trade in non-GMO soybeans.
In a Thursday editorial, Economic Times reiterated a long-held complaint from crushing industry that global soybean price discovery takes place in Chicago despite China being the largest importer and Brazil being the largest producer.
Distrust of foreign futures contracts dates back nearly two decades to 2004 when nearly 70% of local crushers collapsed due to unhedged trades and foreign firms took over a large amount of the country’s crushing capacity.
The editorial further noted that China should expand its import sources of non-GMO soybeans along Belt and Road countries including Russia, Ukraine, Kazakhstan, and African countries. As part of this trade, the Dalian’s futures contract should be the pricing center.
Despite these ambitions to be a global pricing center for non-GMO soybeans, the No.1 soybean contract is not currently accessible for foreign traders. Dalian has some market such as palm oil and iron ore which can be accessed through overseas intermediary brokers. In 2019, the exchange said it intended to open soybean complex futures to international trade, however this has not occurred yet.
Uruguay and China in agreement for sorghum protocol
Uruguay’s government said that it has completed a phytosanitary agreement that would allow sorghum to be exported to China.
The negotiations began in 2018 and Uruguay’s Foreign Ministry reported that the two sides have agreed to the protocol although it still needs to be signed. After signing, Uruguay will submit a list of authorized exporters for China’s approval.
China’s sorghum imports remain dominated by the US, although there are smaller volumes imported from Argentina and Australia. In 2021, the US accounted for 70% of imports, followed by Argentina at 19%, and Australia at 11%.
Uruguay seems unlikely to steal any major market share from established players as the production estimate for 2022/23 is only 120k tons. Production has been as high as 373k tons in 2011/12. Prices and production could increase once the country is able to ship to the world’s largest sorghum importer.
Grain & fertilizer prices update
