Market Matters Blog
Katie Micik DTN Markets Editor

Thursday 11/21/13

Gulf Grain Loadings Increase; River Levels Still Low at St. Louis
A weekly looik at grain transporation.[Read Full Blog Post]
Posted at 2:33PM CST 11/21/13 by Mary Kennedy | Post a Comment
Comments (3)
I have a question about the export market. After China has made a purchase,how can they cancell the purchase? The price goes down and they repurchase at a lower price.When I buy grain the only way I can cancell is to pay the difference between my contract price and the spot price.
Posted by FRANK FULWIDER at 11:25AM CST 11/26/13
There is no rule of law that is enforceable in China. We see similar occurrences in coal markets. Careful use of LC's (Letter of Credit) and performance bonds are required to make sure your product flows, they accept delivery and you get paid.
Posted by jim moore at 1:43PM CST 12/02/13
I've asked this question to several different traders who work with China, and they're pretty tight-lipped about it. Here are a few things I've gleaned about how they're able to cancel and repurchase. First, there's some kind of penalty fee involved, just like any other contract (but no one has yet given me any idea what the penalty is). Second, China's grain trading firms have limited hedging capabilities. The Chinese government doesn't want them to "speculate" so they cannot trade in Chicago. The Dalian exchange is what they have to use for that purpose, but there are some rather strict limits there too. So Chinese companies would rather repurchase grain at a price that's lower than the original purchase price plus the penalty.
Posted by KATIE MICIK at 2:52PM CST 12/02/13
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