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The Dalian Commodity Exchange

The Dalian Commodity Exchange
May 04
03:14 2011

The Dalian Commodity Exchange (DCE) is the second largest futures exchange in the world, located in Dalian (Liaoning province), China, a city of over 6 million people and which is the largest petroleum port in China. Its location on Dalian Bay in the Yellow Sea, with excellent road and rail access to China’s agriculture production regions, make it a logical spot for this important economic function.

The futures exchange itself has only been running since 1993, and a notable difference between this exchange and others in the world is that it is run as a non-profit, self-regulating entity. Other than that, however, it functions the same way as other futures exchanges you may be familiar with. It facilitates efficient price discovery for standardized futures contracts of various commodity markets. Both open outcry and electronic trading is available, typically from the hours 9:00 to 11:30 a.m. and 1:30 to 3:00 p.m. Beijing Time, Monday through Friday. For contract specifics and the exchange’s holiday schedule, visit its website at www.dce.com.cn.

Its futures markets include: corn, No. 1 soybeans, No. 2 soybeans, soybean meal, soybean oil, RBN palm olein, PVC, coke, and linear low-density polyethylene (LLDPE) which was the first non-agricultural futures market the DCE began trading in 2007. The format of the contracts themselves would seem familiar to someone used to trading ag futures in the United States, although of course the details have notable differences. The corn contracts, for instance, are written to represent 10 metric tons of delivery quality corn, traded in Chinese yuan per metric ton. There are contracts for January, March, May, July, September, and November delivery, and all are ultimately settled by physical delivery to a DCE-designated grain warehouse, just like the grain contracts in the U.S.

The differences in units and currencies can be adjusted for and the price data from DCE futures can be used to compare grain prices all over the world. After all, China is the second-largest consumer of corn in the world, and even if it produces much of that corn itself, it is useful to know what corn is worth in that country. China is the world’s number one importer of soybeans. Tracking DCE grain futures prices has the added benefit of seeing an efficiently-traded market at work during “overnight” hours in the U.S., when Chicago Board of Trade futures are often too thinly traded to display much useful information.

To adjust DCE futures prices and make them comparable to U.S. futures prices, you would first convert the price from Chinese yuan to U.S. dollars, using the current yuan-to-dollar conversion rate. Then, to get from metric tons to bushels, take the dollar amount times 0.0254 for corn (0.0272 for soybeans) and you will be able to compare that dollar-per-bushel price in China to the dollar-per-bushel prices seen in the U.S.

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