New soybean options to boost pricing power, risk control

The Dalian Commodity Exchange (DCE) on Monday started the trading of three types of soybean and soybean oil options, a major step in China’s intensifying efforts to ensure food supply and bolster its pricing power and risk control capabilities in a volatile global market.

With the approval of the China Securities Regulatory Commission, soybean 1, soybean 2 and soybean oil options were listed on the DCE on Monday. The three options include a total of 840 trading contracts, among which 160 were listed for soybean 1 options, 408 were listed for soybean 2 options and 272 were for soybean oil options.

These options cover China’s entire soybean industry. Soybean 1 refers to domestic soybeans and soybean 2 refers to imported soybeans. These two categories constitute the raw materials for the nation’s soybean industry, media reported.

Adding to previously listed soybean-related options, the new options on Monday offer the industry a set of complete, sophisticated pricing and risk management tools, experts said.

“The soybean sector is highly marketized, with multiple sources of domestic and foreign risks,” said Li Guoxiang, a research fellow at the Rural Development Institute under the Chinese Academy of Social Sciences, told the Global Times.

“With controllable risks, market players could better perform their own functions to ensure market stability,” Li said on Monday.

“A more sound and mature commodity market could guide production, imports and exports, as well as help adjust supply-demand relations,” Li said on Monday.

Such a market is also very significant to China’s grain security, given that the country relies heavily on imported soybeans and stable prices are crucial to ensure supply, according to Li.

Imported soybeans have accounted for over 80 percent of China’s total consumption in the past 10 years, according to media reports.