Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

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June 9, 2000

Non-GMO, What One Market Offers

In May, the Tokyo Grain Exchange (TGE) began trading Non-GMO (Genetically Modified Organism) soybean futures contracts. The contract specifications are identity preserved Non-GMO No. 2 yellow soybeans produced in the U.S.A. The TGE also continues to trade (since 1984) U.S. soybean futures contracts (Note: the contracts identify the commodity as U.S. soybeans and do not refer to futures contracts traded in the United States). The TGE U.S. soybean futures have been changed to specify GMO or a mixture of GMO and Non-GMO No. 2 yellow U.S. soybeans. Japan will require labeling of processed soybean products April 1, 2001. This labeling requirement, along with the unpredictable price relationship between GMO and Non-GMO soybeans, led to the launching of the new TGE contracts.

Delivery months for all of the TGE soybean contracts are February, April, June, August and December. Price quotes are in Yen per 1000 kilograms (1 metric ton or approximately 2200 lbs.). Contract grades specify soybeans produced in Indiana, Ohio and Michigan, with deliverable grades including Iowa, Illinois and Wisconsin soybeans. Delivery points are at TGE designated warehouses in Japan. The size of the Non-GMO contract is 10,000 kilograms (approximately 367 U.S. bushels) and 30,000 kilograms (approximately 1100 U.S. bushels) for the U.S. soybean contract. Daily price quotes, volume and open interest is available on the Internet (http//www.tge.or.jp/index.html).

Will the Non-GMO soybean futures contracts provide the opportunity for the market to determine prices and/or premiums? The June 8, 2000 TGE settlement price for Non-GMO soybeans was 24060 Yen per 1000 kilograms. The TGE U.S. soybeans settled at 22830 Yen. Using the June 7, 2000 exchange rate of 105.50 Yen per U.S. Dollar, the settlement prices translate into about $6.22 per bushel for Non-GMO and $5.90 for the U.S. soybean TGE contracts. This results in a premium of $0.32 per bushel premium for Non-GMO soybeans. Premiums have varied some since the Non-GMO contracts were launched. For example, on May 24 the premium was $0.41 and nearly $0.52 on May 26.

It is important to understand that these are the premiums for Non-GMO soybeans at Japanese warehouses! This premium would have to cover the extra segregation, identity preservation and transportation costs of producers, merchandisers and shippers. In addition, when comparing prices, remember that the contract sizes are not equal. The Non-GMO contracts are only one-third the quantity of the TGE U.S. contracts and both are much smaller than Chicago Board of Trade soybean contracts.

The role of the TGE Non-GMO soybean futures contracts in determining Japan's (or even World) Non-GMO soybean prices is not yet established. It does provide an open market place for Non-GMO price discovery. Early reports suggest that trading and volume are better than many analysts expected. The real question is whether demand and resulting premiums will be enough to offset the high costs associated with segregating Non-GMO soybeans. -- Melvin


University of Missouri ExtensionDecisive Marketing - June 9, 2000
http://outreach.missouri.edu/agconnection/DCT/DM000609.html -- Revised: April 20, 2004
breesm@missouri.edu