Rice Futures Scheduled to Start in August

Jul. 01, 2024

The Minister of Agriculture, Forestry and Fisheries(MAFF), Tetsushi Sakamoto held a press conference after the cabinet meeting on June 21, concluded “It conforms to the approval standards and it is also appropriate to approve” regarding rice futures applied by Dojima Exchange(ODEX), and notified ODEX of the approval through MAFF in the afternoon on the same day.

Permanent listing in futures commodity market is judged by the following two approval standards:Ⅰ. Sufficient trading volume is expected.Ⅱ. It is necessary and appropriate to facilitate production and distribution.

The product applied this time is the index calculated average price of staple food rice based on “Relative trading prices and quantities of rice” that contain 118 local brands published monthly by MAFF, and by using it as an indicator for rice futures trading, it provides a means of diversifying management risk to rice farmers and dealers. ODEX aims to start trading in August.

The index value of listed product is the average price and it has a high correlation with the price of brand rice in each region, so it allows us to predict to some extent price trends after half a year. Therefore, even if the spot price of rice falls in autumn, one can ensure stable income and avoid price fluctuations by fixing sales in the rice futures market in advance.

Regarding applying of permanent listing of rice futures by ODEX in July 2021, 90 percent of trading volume of 4 products-“Tokyo Rice (National wide paddy-grown brown rice) ”, “Koshihikari Rice from Niigata Pref.”,“Akita-Komachi Rice from Akita Pref.” and “Hitomebore Rice from Miyagi Pref.” - with a track record of high volume during trial listing period at that time was concentrated in Koshihikari Rice from Niigata Pref., and it was determined that participation of rice farmers and dealers wasn’t increasing, so it was disapprove the following August.

At that time, the Liberal Democratic Party proposed to MAFF that a spot market of rice where distributors such as JA Group, wholesalers, etc. can participate should be created, and then, the council founded by MAFF discussed it. As a result, the online rice market “Future Rice Market” was opened in October 2023. However, the market has few participants and lacks excitement.

Meanwhile, ODEX that was disapproved the rice futures in 2021 decided to try again quickly and started moving beneath the surface. The chairman of ODEX, Tatsuo Shigemitsu who was from SBI Group became the center of the re-challenge and started Management Reform Council for ODEX whose management was at a standstill in 2019 when was during the fourth trial listing. The Council formed recommendations in October 2020, and as a result, ODEX was converted to a company limited in April 2021. At that time, the exchange received investment of 2 billion yen from commodity futures traders, etc. ,mainly SBI Group.

(Futures Tribune・issued June 25, 2024 ・no.3295)
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