State
Development & Investment Corporation (SDIC), a state-owned investment
holding company directly under the central government, announced on its
official website that its holding company named SDIC CGOG Futures Co., Ltd,
became a member of China Starch Industry Association (CSIA) in July 2013, in
order to assist Dalian Commodity Exchange (DCE), one of the four futures
exchanges in China, to promote the listing of high fructose corn syrup (HFCS)
and corn starch as futures. SDIC expressed that HFCS and corn starch were the
two key varieties under DCE's current research to become futures. If HFCS and
corn starch can become futures, it will bring more opportunities than
challenges to domestic producers of these two commodities.
HFCS
and corn starch becoming futures will have a positive effect on setting the
benchmark prices of these two products in China. At present, China has no
authoritative benchmark prices of HFCS and corn starch, which means that prices
of these two products vary with producers. Because of the intense competition
in these two industries, most domestic HFCS and corn starch producers always
apply the "low-price strategy", even some producers continuously
decline their products' prices, weakening the bargaining power of domestic HFCS
and corn starch producers. Under this situation, the market price of HFCS and
corn starch in China are irregular at present. The futures price of HFCS and
corn starch can be used as their authoritative benchmark prices, which is
believed to strengthen the bargaining power of domestic HFCS and corn starch
producers.
Besides,
according to Zhou Bo, a member of DCE, HFCS and corn starch becoming futures
will be beneficial to domestic HFCS and corn starch producers and domestic
downstream enterprises. The hedging function of futures can ensure both HFCS
and corn starch producers and domestic downstream companies lower risks and
more profits. Domestic producers can adjust their production plans and sales
strategies according to the futures prices, and downstream companies can adjust
their purchase volumes at the same time.
For
domestic HFCS and corn starch producers, if they want to take part in futures
exchange, they need to acquire relevant qualification after the listing of HFCS
and corn starch are approved. It is worth mentioning that the raw material
supply and quality assurance period jointly determine that the range of
production and sales is not large. In addition, most HFCS producers in China
follow the "factory direct sales" method. As a result, to acquire the
futures checking and acceptance qualification will be a priority for domestic
HFCS producers to participate in futures trading.
Moreover,
the companies which want to take part in the futures trading of HFCS and corn
starch in the future will need relevant futures researcher. An excellent
futures researcher will be helpful to improve their anti-risk capability.
If
HFCS and corn starch can become futures, it is believed that these two
industries will further develop. For one thing, to be futures, more relevant
research organizations will bring more information about not only the domestic
market but also overseas market, which may affect the futures prices. At
present the channel through which producers gather the information mentioned
above are confined to a few organizations only, but the situation will be
changed after the futures are approved. Also becoming futures will improve the
concentration ration of the industries. It is obvious that large producers will
more easily acquire relevant qualifications to enter the futures market than
the smaller ones, thus, the smaller ones will face more risks than the larger
ones. Finally, more small producers will withdraw from the market or be
acquired by large ones, and the concentration ration of the industries will
increase.
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Corn Products China News, a
monthly publication issued by CCM on 20th, features “Supply and
Demand”, “Import and Export Analysis”, “Price Update”, “Market & Company
Dynamics”, “Policy”, “Corn Supply” and other more information researched and
reported by CCM’s professional journalists. It is a reliable intermediate for
you to know more about the corn industry in China
CCM is dedicated to market research in China
Guangzhou
CCM Information Science & Technology Co., Ltd.
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