August 2009 Newsletter
Tianping Auto Insurance is the first local firm to buy carbon credit
On August 5, 2009, Tianping Auto Insurance Co (TPAIC), a Shanghai-based insurance company, purchased 8,026 tons of carbon credits, sealing the first such domestic deal in China's mushrooming voluntary carbon trading market. The carbon credits were purchased at around $5 per ton, and the total spending amounted to around 40,609 US dollar.
The transaction used the verified emission reductions (VERs) price of the Chicago Climate Exchange as a reference, as there was no clear pricing mechanism for such trade in China before. China lacks the legal and structural framework for carbon emission trading, as well as a sound financial service system for such trade. China is the world's largest supplier of carbon credits. Since CBEX started operating last August, a total of 30 million tons of CO2 credits have been traded at the exchange.
Agriculture is the one of the largest industrial source of global GHG emissions, and the impact of agriculture on climate change through GHG emissions has not been widely addressed. California based Arcadia Biosciences, GIC’s strategic partner, signed an agreement with the government of the Ningxia Hui Autonomous Region of China in 2007 and has been conducting field experiments to quantify baseline GHG emissions from rice cultivation, as well as reductions in GHG emissions resulting from reduced application of nitrogen fertilizer.
GIC has launched a new product—GIC ACI index to be traded on exchanges and in ETF portfolios based on a proprietary formula measuring the transactional value of carbon credits for production and secondary/ value added agro-industries.
The GIC consortium of Arcadia Biosciences and a third strategic partner, ClearCarbon Consulting, will also be launching a non-profit and for profit vehicle for exchanging carbon credits for new carbon abatement technologies.
(Yangjun Lu, GIC Group, yjl@gicgroup.com +1.703.684.1366)
China soybean reserves may be overstated - GIC
MELBOURNE, July 28 (Reuters) - China's soybean reserves may be less than many market estimates because stocks are poorly reported or are spoiling inside rundown storage facilities, a leading U.S. agribusiness consultant said on Tuesday.
Rick Gilmore, president of Virginia-based GiC Group, said he had anecdotal evidence indicating that Chinese reserves, which have a big influence on world soybean prices, could be significantly over-estimated.
Gilmore declined to be specific, citing sensitivities as his firm operates in China, which he described as a wild card in the international soybean marketplace: a keen buyer if the price was right but its import needs were difficult to pin down.
"There's a variance of views as to what the storage situation is," he told Reuters on the sidelines of a grains conference.
"We really don't know what the level of reserves are -- the common speak is that they're building up stocks but as a bit of a contrarian I would say that might not the case," said Gilmore.
China, the world's largest importer of soybeans for use in animal feed and for human consumption, has about 6 million tons of reserves held by the state, according to trade estimates.
Gilmore said there were a variety of reasons why stocks might be lower than thought, noting they might have been overstated to influence prices and that stocks held in rural areas might have deteriorated beyond use because of poor storage facilities.
"It is actually a state secret how much the stocks are," Gilmore added.
While grain storage facilities at key Chinese ports are modern, traders say those in the interior can be very basic, offering little protection against the weather.
Gilmore said the market was still guessing if China would remain a big importer of beans, mainly from the United States.
He said China's buying of U.S. soybeans in April and May had boosted U.S. soybeans prices, leading to hopes of sustained higher prices, but those hopes were crushed by Chinese importers cancelling orders then re-entering the market at lower prices.
Soybean futures prices on the Chicago Board of Trade surged as much as 30 percent in the first half of this year, but slipped back early this month.
"The big question is what China is doing," Gilmore said.
"They've been buying old crop, selling from their reserves (and) there's been official reports of speculation in China way exceeding what the demand requirements are, so it creates an element of uncertainty."
"I think it is symptomatic of Chinese procurement practices," he added.
Ultimately, he said, China was price sensitive and was prone to back off imports if prices were deemed too high.
"There's an ability to tighten the belt in China if it needs to, so I don't think there will be any sustained spike up."
Soybeans prices have been propped up in recent weeks by tight old crop supplies in the United States due to demand from China and reduced South American stocks because of drought.
China's soybeans imports this year are more than 40 percent above the level a year ago.
But new crop supplies could reverse the situation. The U.S. appears to be poised to harvest its largest soybean crop in history in 2009. The United States Department of Agriculture is forecasting a crop of 3.26 billion bushels or 88.723 million tons.
(Reporting by Bruce Hextall; Editing by Mark Bendeich)
bruce.hextall@thomsonreuters.com; +612 93731236
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