China Securities Regulatory Commission (CSRC) announced yesterday that it had approved the application of Dalian Commodity Exchange to launch corn futures.

The exchange will start trade of corn futures after required preparations, CSRC said.

It is also the first food futures product allowed by the Chinese authorities since 1998, when an industry clean-up witnessed the cancellation of many futures products in the country.

A spokesman with the Dalian exchange said yesterday that the exchange had prepared the corn contract, trading rules and technology and could guarantee stable operation of the system.

It would pick an appropriate time to launch the product as soon as possible, he said.

China is the world's second biggest corn consumer, with an annual output of 120 million tons, which accounts for about one third of the overall grain output in China.

As a major raw material for feedstuff and industrial processing, corn has also become a lifeline for more than 500 million peasants in China, said a researcher with the Dalian Commodity Exchange, which has been preparing for corn futures for more than five years.

The movement of corn prices and its supply and demand therefore have a major impact on the agriculture sector and the overall national economy, he said.

The trade of corn futures in China will enhance its position in determining the corn prices in international markets.

The price-discovering function of the futures market will also help promote the sound development of the current market and the overall reform of the foodstuff circulation system in China.

From the corn futures, farmers should be able to adjust their planting plans according to market supply and demand and hedge risks brought by price fluctuation, the researcher said.

The overall futures market in China is also in the middle of a strong recovery. Corn futures is the third new futures product approved by CSRC this year, following the approval of fuel oil futures in Shanghai Futures Exchange and cotton futures in Zhengzhou Commodity Exchange in April and June respectively.

Cotton futures is already being traded in Zhengzhou, while fuel oil futures is expected to start trading next week in Shanghai.

The fact that each of the three futures exchanges is able to launch one new product this year is itself a breakthrough in the futures industry, experts said.

Before that, the exchanges had not promoted any new trading product since the late 1990s, when a slew of price rigging scandals forced the authorities to rectify the futures industry, with the closure of many futures exchanges and trading products and leaving only about a dozen futures products in the three existing exchanges.

But since last year the industry witnessed a recovery, with a record turnover of 10.84 trillion yuan (US$1.31 trillion) during the year and a staggering 8.47 trillion yuan (US$1.01 trillion) turnover in the first half of this year.

(China Daily August 18, 2004)