By Jae Hur
TOKYO, May 18 (Reuters) - Concerns over food safety among Japanese consumers prompted explosive turnover when the world's first non-genetically modified (GM) U.S. soybean futures contract began trading on the Tokyo Grain Exchange on Thursday. Turnover for the new non-GM soybean futures was estimated at 91,410 lots (914,000 tonnes), compared with 12,136 lots (364,000 tonnes) in existing unsegregated U.S. soybean futures. Estimated volume for soybean futures on the Chicago Board of Trade (CBOT), the world's largest agriculture product futures market, was 59,000 lots (about 8.0 million tonnes) on Wednesday. "The high turnover on the contract's first trading day reflects domestic concerns about the safety of genetically modified food," said Nobufumi Iimori, Nihon Unicom Corp's structured products department manager. The prospects for the non-GM contracts looked relatively bright when compared with other commodities listed recently due to their lower margins and expectations of more volatility in the summer, Iimori said.
The Tokyo Grain Exchange set customer margins at 20,000 yen for standard price non-GM soybeans under 20,000 yen, cheaper than the 60,000 yen margin for unsegregated soybeans. Critics have raised concerns that genetically modified foods could harm the environment and be a threat to health.
BUT STILL CAUTIOUS
Although the non-GM soybean contracts appeared to make a successful debut in their first trading day, analysts said they faced several hurdles, including doubts over the purity of the crop to be delivered. "The non-GM soybean contracts may gradually be a core commodity for the exchange in terms of turnover," said Ha Sangsoon, general manager of Ace Koeki Co's asset management team. "But there are some concerns over the purity of the crop."
Thus there was a reluctance to take long positions until the nearby December 2000 contract expires and no problems are found with crop quality on delivery, Ha said. In the physical market, brokers said some non-GM soybeans had feched prices below those for unsegregated GM crops early this year because they contained high levels of GM soybeans.
One trader said liquidity would be another problem for the new soybean contracts because Japan imports less non-GM soybeans. Japan is expected to import 4.8 million tonnes of soybeans in 2000 -- 3.7 million tonnes for crushing, 1.0 million tonnes for food use, and 100,000 tonnes for feed. Out of the total food soybean imports expected this year, unsegregated U.S. soybeans are likely to account for 60,000 tonnes, while non-GM U.S. soybeans are seen at more than 550,000 tonnes and non-GM soybeans from other countries such as Canada and China will account for the rest. Soybeans for crushing and feed are rarely segregated on the basis of their genetic origins, because animal feed and edible vegetable oil are exempt from the labelling requirements. The exchange and three other exchanges decided last year to add non-GM U.S. soybean contracts because food processor demand has begun to shift to non-GM soybeans after a government decision to label foods containing GM ingredients from next April.
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