Kazakh Tenge

Today September 1^st 2016 the Kazakh Tenge traded at 340.15 to $1 dollar, it hasn’t been pretty for the Tenge, last week it was relatively flat against the US Dollar only going down 0.32% but last month it was down 3.92% against the US Dollar.  We have seen some come back from its all-time high of 386.44 to 1 dollar which was in January of 2016 but it is still a long way to go to get back to its record low of 84.40 in January of 1999. With continued low energy prices on the horizon and increasing unrest in former CIS nations as well as its neighbors we believe the Tenge will continue to be weak, but exciting to watch.  

China establishes an agricultural credit guarantee

David Nealis in soybean field

China establishes an agricultural credit guarantee company

The Chinese Ministry of Finance has informed us that China has established an agricultural credit guarantee company.

The non-profit firm is a policy guarantee institution which was established by the China Banking Regulatory Commission (CBRC), the Ministry of Finance and Ministry of Agriculture.

The Ministry of Finance has said that the initial funding of the company was more than 4 billion yuan ($611 million), including 3 billion yuan from the State Treasury and the remaining came from 11 provincial-level guarantee institutions that already exist.

They also stated that they expect the capital to increase to 15 billion yuan over the next three years as more organizations join the agricultural credit guarantee company.

According to the Ministry of Finance the goals of the company are to set national re-guarantee business standards, and off re-guarantees to all provincial-level guarantee organizations and developing agricultural credit guarantee products.

We at Ceres expect this to have a positive impact on the Chinese farmer’s cash flow and give some much needed financial relief to small and midsize Chinese farms. 

11 herbs and spices with a side of Om - KFC opens its first outlet in Tibet

11 herbs and spices with a side of Om

KFC opens its first outlet in Tibet

KFC became the first major Western fast food chain to open an outlet in Tibet. The restaurant is located in the Shenli Shidai shopping center in the Tibetan capital of Lhasa.

According to Xinhua News Locals formed long queues in the restaurant on its first day and local children posed for photos in front of the store.

"Other fast food brands operating in Tibet over the past few years have showed people here have a big appetite for fried chicken and hamburgers," said Chen Biao, a manager of the Shenli Shidai shopping center.

 KFC first attempted to enter the Tibetan market in 2004, but decided to delay entry into the market believing that it didn’t make economic sense at the time and The Dalai Lama, Tibet's spiritual leader in exile, who is an advocate of vegetarianism condemned KFC’s plan at the time.

I am assuming that the KFC Tibet outlet will be very popular with Chinese and foreign tourists alike if it is anything like the other KFC outlets across China in touristy areas.

According to Xinhua news agency, KFC is planning to build a frozen storage area in the suburbs of Lhasa to aid in the growth of its business in the Himalayan region. KFC entered the Chinese market in 1987 and now has more than 5000 oulets in over 1,100 cities across China.

With infrastructure improving in Tibet and with Chinese government encouragement to develop the region, I aspect that we will be seeing more brands entering the market place on top of the world.

And how else would one end a story about KFC in Tibet than with a quote from the sage Carl Spackler ( Bill Murray) :

 “Carl Spackler: So I jump ship in Hong Kong and I make my way over to Tibet, and I get on as a looper at a course over in the Himalayas.

Angie D'Annunzio: A looper?

Carl Spackler: A looper, you know, a caddy, a looper, a jock. So, I tell them I'm a pro jock, and who do you think they give me? The Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace, bald... striking. So, I'm on the first tee with him. I give him the driver. He hauls off and whacks one - big hitter, the Lama - long, into a ten-thousand foot crevasse, right at the base of this glacier. Do you know what the Lama says? Gunga galunga... gunga, gunga-lagunga. So we finish the eighteenth and he's gonna stiff me. And I say, "Hey, Lama, hey, how about a little something, you know, for the effort, you know." And he says, "Oh, uh, there won't be any money, but when you die, on your deathbed, you will receive total consciousness." So I got that goin' for me, which is nice.” – Caddyshack

Have a Great Weekend

David Nealis

President of Ceres Ltd. 

A Chinese Sugar Option...........Maybe.

A Chinese Sugar Option – the Zhengzhou Commodity Exchange hopes to launch a Sugar Options Contract in 2016.

by Jane Yang, Bob Meara and David Nealis of Ceres Ltd

Over the last 12 months we have seen some major changes in the Chinese capital markets industry including a recent surge in Futures prices in China.

For those of us involved in the Chinese capital markets industry all too often we have heard about potential products being launched and with patience we are still waiting for some of them like the Crude oil contract to be traded in the Shanghai FTZ that potentially would include non-Chinese traders which would be ground breaking in China.

 And we have experienced products and policies being taken away over the last 12 months.

Jane Yang and David Nealis of Ceres Ltd on the CME trading floor

 

In the midst of this comes the hope of a Sugar Options contract launched by the Zhengzhou Commodity Exchange (ZCE).  Currently there is only one options contract traded in China (the World’s 2^nd largest economy), which is the SSE50 ETF option.  

Zhengzhou Commodity Exchange (ZCE) has claimed that they are fully prepared to launch it anytime once they get final permission from CSRC (Chinese Security Regulation Commission.

ZCE is one of the four futures exchanges in China. The products traded in the exchange are mostly agriculture products; wheat, rice, cotton and sugar contracts among others are traded there.
 
For those who don’t trade sugar here is a quick macro picture of sugar around the world:

·         The world top 5 sugar producing countries are Brazil 38.7MT (Metric Ton), India 26 MT, China 11.4 MT, Thailand 10.6 MT and US 7.2 MT.

·         The top 5 importing countries are Philippines, Nigeria, EU, Iran and Iraq.

·         The total annual Sugar production worldwide is 172.5 MT. 

·          Total annual sugar consumption worldwide is 171MT and the total sugar stock worldwide is 42.2 MT. (Year 2015)

ICE No.11 Sugar contract VS ZCE Sugar futures contract

Product	Symbol	Contract Size	Quote	Tick Size	Contract Months	Trading Hours London time	Minimum Trading Margin
ICE Sugar #11	SB	12,000 pounds (5442kgs)	Cents/pound	0.01cent/lb	3,5,7,10	8:30am-6:00pm (London time)
ZEC White Sugar	SR	10 Tons (10,000kgs)	CNY/Ton	1 CNY/Ton	1,3,5,7,9,11	Beijing Time UTC+8 9:00-11:30 a.m. 1:30-3:00 p.m.	6% of contract value

 

 

ICE No.11 Sugar option contract VS ZCE Sugar futures options contract

Product	Symbol	Contract size	Quote	Tick Size	Contract Months	Strike Price intervals	Last trading day	Trading hours
ICE No.11 sugar options	SO	One futures contract	Cents	1/100 of a cent per pound	Regular Options: 1, 3, 5,7,10. Serial Options: 2, 4, 6,8,9,11,12, For the January regular option, the March contract is the underlying future. For serial options, the underlying future is the next Regular futures contract month.	Strike Price Increment will be $.25 cents at all price levels	15th calendar day of the month that precedes the options trading month, or the first business day after the 15th should this day be a weekend or an Exchange holiday.	8:30am-6:00pm (London time)

 

Product	Symbol	Contract Size	Quote	Tick Size	Contract Months
ZCE White Sugar options	SR +C/P + Strick price	1hand of sugar futures contract	CNY/Ton	0.5CNY/Ton	1,3,5,7,9,11
	Expiration Months	Amount of Stick Prices	Strike Price Intervals	Last Trading Day	Trading Hours  UTC+8
	Two months before futures contracts’ delivery months	5 out-of-money, 1 at-the-money and 5 in-the-money according to the price range of exercise price	futures price < 3000RMB,  Strike Price intervals is 50RMB/Ton; 3000RMB7000RMB,  Strike Price intervals is 100RMB; futures price>7000RMB, Strike Price intervals is 200RMB.	Last trading day of the options Expiration Months	9:00-11:30 a.m. 1:30-3:00 p.m.

 

 

 

 

 

Data from ZCE showed in 2015, that the sugar trading volume almost doubled and more than 30% of the trades were physical hedging. According to the their survey,  90% of the big saw sugar producers, 80% of big sugar trading companies, 60% of the large manufacture participated in sugar futures trading hedge their risk.

Most of China’s domestic sugar production is grown in the south of the country, mainly in Guangxi province which produces roughly 70% of China’s domestic sugar production and Yunnan province produces more than 15%.

Hua Tai Chang Cheng Futures forecasts a 22% from 2015 to 2016 total sugar consumption in China. The sugar consumption per Chinese is only 1/3 of the world’s average level, as the Chinese economy continues to grow and the tastes change in China we see a huge potential increase in Chinese domestic demand.  

David Nealis and Bob Meara of Ceres Ltd at the Shanghai Futures Exchange

We are hopeful that is if the contract launches, it will be an active contract.  

We look forward to trading the sugar options contract at China’s Zhengzhou Commodities Exchange.

If you are interested in participating in Chinese financial markets, please contact: info@ceres888.com