To implement the significant strategic deployment of “introducing as early as possible new varieties of rice and other commodity futures that meet the needs of national economic development” outlined in the “Several Opinions of the General Office of the State Council on Providing Financing Support for Economic Development”, the China Securities Regulatory Commission (CSRC) has recently approved of launching the futures trading of early indica rice by the Zhengzhou Commodity Exchange (ZCE) . According to relevant regulations of the “Regulations for the Administration of Futures Trading” and the “Measures for the Administration of Futures Exchanges”, the CSRC will approve that the ZCE lists futures contract on early indica rice as soon as possible upon the completion of all the preparatory work and related procedures.

Rice, consumed by more than one half of the population worldwide as the staple food, is a major crop around the world. China enjoys the reputation of the world’s highest rice yield country, The yield of rice, China’s most important crop, accounted for about 30% of the total global production in 2007. The 29.23 million hectares of cultivation area and the 186.50 million tons of yield of rice, or 27.7% and 37.2% in the total cultivation area and yield of domestic cops, respectively, are obviously richer than other major crops such as wheat, corn, etc. Meanwhile, China’s rice cultivation covers a vast land. Except for Qinghai Province, 30 other provinces, autonomous regions and municipalities in the mainland are rice-growing regions. Among them, the rice cultivation area in 11 provinces and autonomous regions exceed 1 million hectares. The price of rice, one of the basic revenue sources for local farmers, exerts a considerable influence on their income.

Currently, rice, China’s only staple crop yet to open for the futures trading, calls for comprehensive, fair and authoritative pricing mechanism of crops like wheat and corn and hedging instruments of low cost and high efficiency. In recent years, rice prices have gone through sharp fluctuations, with mounting market risks. The rice producers are short of the navigation of price signals for better production and rice sellers fail to shun the risks of price fluctuations. There is a relatively intensive need for discovering prices through futures trading and conducting the hedging.

Carrying out the futures trading of rice is, above all, favorable for perfecting the national system of futures varieties of agricultural produce and expanding the scope of national economy served by forward market; in the second place, by improving the pricing mechanism, the implementation of the future trading of rice will help relevant government departments to grasp market trends for timely and correct adjustment and control measures in stabilizing the rice price, balancing the grain production and safeguarding the country’s food security; thirdly, it is advantageous for farmers at large to plant and make structural adjustment by utilizing the market pricing information; in the fourth analysis, it can provide risk control devices for rice growers and sellers in improving management, stabilizing rice production and operation. In a word, to cater for the national economic growth, we should establish a rice forward market and push it step by step to bring its economic functions into play.

Certain discrepancy exist between different types of rice, which falls into indica and japonica in terms of its physiological and morphological characteristics, or early rice, middle-season rice and late rice with respect to its seeding time. According to careful studies and in-depth research it is reasonable to consider the early indica rice as the transaction target of futures contract on rice at present, this is also more reliable. Currently, the ZCE has completed the prophase design of futures contract on early indica rice, and worked out a relatively strict system of transaction, settlement and delivery and demonstrated risk control measures including gradient margin system, price limit and position limit system. Provided that the market risk is controllable, predictable and bearable, the CSRC will approve as soon as possible the ZCE’s list of futures contract on early indica rice on the basis of the stipulations in relevant laws and regulations, and dierect the ZCE in the cultivation of futures of early indica rice and the gradual perfection of rice varieties system in line with the market development.