Tokyo Grain Exchange Inc., operator of Japan’s second-largest commodities bourse, is under pressure from shareholders to cease operations and transfer the trading of farm futures to rivals because of declining volumes.
The exchange may transfer trading of Japanese rice and “azuki” sweet beans to the Kansai Commodities Exchange in Osaka, said Jitsuo Tatara, chairman of broker Yutaka Shoji Co., one of the Tokyo bourse’s 99 shareholders.
Corn and soybean futures may be taken over by the Tokyo Commodity Exchange, which shares the same trading system, he said.
The grain exchange is losing about ¥40 million a month as retail investor participation shrank after the government tightened regulations on the sale of riskier financial assets to individuals.
The bourse revived rice futures in August for the first time in seven decades to attract money from hedgers and investors.
Concerns that rice tainted by radiation from Fukushima may be delivered depressed volumes, said Kazuhiko Saito at Fujitomi Co.
“There are no other options for the exchange but to transfer its agricultural futures to other bourses,” said Hideaki Futaya, president of Unicom Group Holdings.
Exchange board members will meet on Feb. 21 to discuss the bourse’s future, spokesman Yuta Asai said. Yutaka Shoji’s Tatara said he expects the members to decide on the transfer at the meeting.
The number of domestic raw-materials bourses dropped to three from seven in 2005, when the government tightened regulations on retail sales of commodity futures, leading to a slump in volume.
Tokyo Grain Exchange had an operating loss of ¥773.7 million in the year that ended last March 31, as trading volume plunged 25 percent on reduced participation by local investors. The bourse trades corn, soybeans, coffee, raw sugar, rice and azuki beans. Trading volume dropped to 2.66 million lots last year from a record of more than 26.5 million lots in the year ended on March 31, 2004.
Kansai Commodities Exchange manager for general affairs Katsuo Suzuki declined comment on the transfer of rice and azuki futures.
Tokyo Grain Exchange President Yoshiaki Watanabe said in in July that listing of rice futures may boost trading volume and help it break even after three consecutive years of losses. In January, average trading volume for rice was 471 lots a day, far below the bourse’s target of 5,000 lots.
“Rice failed to draw money from individual investors as the government restricts sales activities by brokers,” said Takaki Shigemoto at research company JSC Corp. “Without speculators, producers and distributors are unable to use the market for hedging.”
The shrinking volume led the board members of the Tokyo Grain Exchange in 2010 to decide to transfer trading to the Tokyo Commodity Exchange, after integrating their systems last January.
The grain exchange dropped the plan after it obtained approval to list rice from the agriculture ministry. Without government price support, volatility could increase the need for farmers and merchants to hedge.
“We have not received any new request yet” to take over trade from the grain exchange, Tocom President Tadashi Ezaki said Feb. 7. “We are not in a situation to take over what does not work as a business.”