Report No.230803

NEWS

- Domestic -

Rice Transaction Rules Revised but Futures Trading Declined

The Ministry of Agriculture, Forestry and Fisheries (MAFF) drafted on March 23 a proposed revision of the system of tender at the National Rice Trade and Price Formation Center. The revision includes increasing the frequency of rice tender to once a week from once a month as practiced at present. The revision also introduces forward delivery-type transactions, under which the buyers such as rice wholesalers can post in advance the desired prices and, spot-type transactions in which the sellers such as rice collecting agents can post in advance their desired prices, both on top of the basic tender trade hitherto conducted.

Details of the new rules will be laid down by the administrative commission of the Center by this summer, and they will be applied to transactions in rice of 2006 fall harvest if conditions are ready soon enough.

The new rule will prohibit tender transactions at the Center between JA ZEN-NOH (National Federation of Agricultural Co-operative Associations) and its 27 subsidiary companies, the Pearl Rice Wholesales, Inc., for the purpose of keeping fair transactions.

Also from the viewpoint of fair transactions, MAFF will keep track and regularly publicise the prices formed in cross-trades by JA ZEN-NOH. This will be additional to information of prices formed at the Center for the brands of rice listed for conventional basic transactions and will include i) brands listed only for forward delivery-type transactions and for spot-type transactions as well as ii) brands for which the basic tender trades continue to fail.

In the meantime, Mr. Shoichi Nakagawa, Minister of Agriculture, Forestry and Fisheries announced at the press meeting of March 28 his decision to decline approval of the applications for experimental listing of rice on the futures trading, which were submitted by The Tokyo Grain Exchange and Kansai Commodities Exchange at the end of last year. MAFF explained the reason for this decision saying "while it is desirable to have futures market for rice when conditions for rice production, distribution and consumption are ripe for such a market to operate." However, the futures market "may threaten to pose great hardship in promoting smooth implementation of production adjustment in rice at the moment." The decision to decline was made on April 12 after hearing opinions from the two exchanges.

New Trade Menues for Rice

Basic transactions by tender - stable trade through a year round

Sellers can post desired prices in advace; one-third of the planned annal sales volume to be listed.

No volume requirement; sellers can post desired prices in advace during immediate post-harvest period while subject to price limits for the rest of the season.

Both of the above trades will be conducted weekly; buyers to take the bid rice within a month of tranaction.

Forward delivery-type transactions under buyers initiative

Transactions conducted weekly.

Buyer publicises in the open the desired volume and price and the offer goes to the seller who offered lowest price; Buyer can place an order for deliver in 3-months at longest.

Spot-type transactions under sellers initiative

Transactions conducted weekly.

Seller publicises in the open the desired volume and price and the offer goes to the buyer who bid for the highest price; no specific volume requirement.

Publish listing plan for the next 3 months in the preceding month; delivery to be made within a month of transaction.

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