SOYBEAN MEAL FUTURES TRADING MANUAL DCE Investor Education Material Futures Trading Manual Series

Dalian Commodity Exchange

SOYBEAN MEAL FUTURES TRADING MANUAL Distribution of DCE Members

By Dec. 31, 2015

3 Heilongjiang

5 Jilin 2 23 8 Liaoning Xinjiang 1 Beijing Inner Mongolia 1 6 Hebei Tianjin Ningxia 4 1 Shanxi 3 Qinghai 1 Shandong 3 3 Gansu 13 Shaanxi Henan Jiangsu 28 Tibet 3 2 Shanghai 3 Anhui 5 Hubei Sichuan Chongqing 13 Zhejiang 3 1 Hunan Jiangxi Guizhou 5 Fujian 2 Taiwan Yunnan Guangxi 23 Guangdong H.K. Macao

2 Hainan

SOYBEAN MEAL FUTURES TRADING MANUAL

CONTENTS

I. Soybean Meal Contract Overview 1 II. Production, Distribution and Consumption of Soybean Meal 2 III. Major Factors Influencing Soybean Meal Price 4 IV. Measures of Risk Management of Soybean Meal Futures Trading 7 V. Procedures and Relevant Rules for Delivery of Soybean Meal Futures 9

Annex 1: DCE Soybean Meal Futures Contract 14 Annex 2: DCE Soybean Meal Delivery Quality Standard 15

Annex 3: List of Designated Delivery Warehouses for DCE Soybean Meal 16 Annex 4: DCE Soybean Meal Price Daily Chart 17 I. Soybean Meal Contract Overview

Soybean meal is a by-product of soybean oil extraction. There are two types of soybean meal: single leaching soybean meal and dual leaching soybean meal. The first is the by-product after soybean oil extraction by way of leaching, and the latter is the by-product after soybean oil extraction by way of crushing and leaching. China’s soybean meal market is dominated by single leaching soybean meal, as it is more sophisticatedly processed and richer in protein. Soybean meal is generally irregularly-shaped flakes, pale-yellow or light-brown-colored, and smells roasted soybeans. Among the 12 oil meal feeds including cottonseed meal, peanut meal and rapeseed meal, soybean meal is the one with the largest production and the widest application. As a raw material rich in protein, soybean meal is not only a major component of livestock and poultry feed, but also used in pastries, healthy food and cosmetics, as well as in making antibiotics. Besides, aqua-cultural need of soybean meal has been increasing rapidly in recent years. With the advancement of science and technology, soybean meal will be put into even wider use.

Use of Soybean Meal in Feed Industry (%)

29% Hogs

7% Cattle

Poultry 52% 6% Cows 2% Food Industry 2% Pets 2% Others

Source: Soybean Infosource

As an important source of vegetal protein, soybean meal is characterized with fluctuating price, long industrial pipeline, numerous engaging companies and widespread influence, provoking strong hedging and investment needs among relevant companies. Through the successive launches of soybean, soybean meal and soybean oil contracts, DCE offers a comprehensive portfolio and a perfect hedging system of soybean-relevant products, providing a handy and all-round hedging venue for relevant companies.

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II. Production, Distribution and Consumption of Soybean Meal

1. Production

Soybean meal is primarily produced in the U.S., Brazil, Argentina, China, India and the E.U. China currently produces over 29% of the world’s total soybean meal. In recent years, with the rapid development of China’s crushing industry, China’s production of soybean meal maintains an annual growth rate of approximately 20%. China is one of the major producers of soybean meal. China’s annual output of soybean meal reached 15 million tons in 2000, and maintains rapid growth rate since 2001. In 2009, China overtook the U.S. as the world’s largest soybean meal producer. At the same time, China’s soybean meal production landscape changed drastically. Before mid 1990s, the three provinces in northeast China were the country’s major soybean meal production bases, producing over 60% of the country’s total. However, the position has been taken over by coastal regions such as Shandong, Jiangsu and Guangdong, as oil extraction plants in the coastal areas have been thriving since 2002.

Output of the World’s Largest Soybean Meal Producers 1999/00-2015/16 Unit: 1,000 tons

Country 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11 / 12 12/13 13/14 14/15 15/16

Argentina 13,712 13,718 16,559 18,663 19,761 21,601 25,012 26,061 27,071 24,363 26,624 29,312 27,945 26,089 27,892 30,928 33,400

Brazil 16,478 17,725 19,407 21,449 22,450 22,740 21,920 24,110 24,890 24,700 26,120 28,160 29,510 27,310 28,540 30,890 30,960

China 11, 9 7 5 15,050 16,300 21,000 20,190 24,026 27,296 28,465 31,280 32,475 38,644 43,560 48,288 51,440 54,531 59,008 63,910

India 3,376 3,574 3,697 2,694 4,459 3,616 5,381 5,255 6,705 5,960 6,240 7,440 7,720 7,920 6,640 5,600 5,160

U.S. 34,102 35,730 36,552 34,649 32,953 36,936 37,416 39,037 38,359 35,473 37,836 35,608 37,217 36,174 36,909 40,879 40,564

E.U. 11, 4 0 7 13,310 14,243 13,123 11, 2 2 1 11, 4 0 8 10,904 11, 6 9 3 11, 8 0 8 10,223 9,950 9,633 9,668 10,398 10,614 11, 2 18 11, 6 9 0

Global 107,085 116 , 0 0 7 124,864 130,222 128,908 138,605 146,402 153,806 158,707 152,160 165,275 174,344 180,484 181,258 189,532 207,172 216,917

Source: U.S. Department of Agriculture

2. Consumption

The world’s consumption of soybean meal leaps forward in recent years, and expects to achieve 215.19 million tons in the year of 2015/16. Currently the soybean meal takes up over 60% of the world’s total consumption of protein meal. The E.U. had been the world’s largest soybean meal consumer until 2008, and its annual demand remains around 30 million tons in recent years. In the year of 2008/09, China overtook the E.U. to become the world’s largest consumer of soybean meal, and its consumption stood at 62.08 million tons in the year of 2015/16. The global consumption of

2 soybean meal was propelled in part by the momentous growth of soybean meal consumption in East Asian countries such as China, Korea and Japan and Southeast Asian countries since 2004.

Global Consumption of Soybean Meal 1999/00-2015/16 Unit: 1,000 tons

Country 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16

U.S. 27,289 28,363 29,545 29,096 28,531 30,446 30,114 31,166 30,148 27,898 27,795 27,489 28,614 26,308 26,804 29,243 30,209

Brazil 7,086 7,063 7,580 8,055 7,696 8,960 9,328 11,118 12,257 12,418 13,000 13,950 14,100 14,200 14,650 15,250 15,550

E.U. 29,419 30,910 33,657 33,594 32,982 32,893 33,126 33,525 35,432 31,836 30,359 30,952 29,670 27,042 28,392 30,142 31,642

China 12,562 14,995 15,204 20,157 19,547 23,437 27,776 27,630 30,849 31,673 37,546 43,382 47,435 50,091 52,534 57,471 62,080

Global 108,579 115,775 123,177 129,910 127,632 136,734 145,273 150,979 157,417 153,243 161,484 170,861 177,995 177,449 186,270 201,952 215,192

Source: U.S. Department of Agriculture

Chinese residents’ intake of meat, eggs, poultry and fish increases significantly as their living standards improve, propelling the booming of feed processing industry. The rapid increase of feeds for poultry and quality lean hogs stimulates the demand for quality protein feeds. Meal products are various in China and the outputs of rapeseed meal and cottonseed meal are both large. However, as both kinds of meal cannot be used in feeds unless detoxified, the most widely used quality meal in China is soybean meal. In China, soybean meal is mainly consumed in the Pearl River Delta and the Yangtze River Basin, or to be specific, provinces and cities of Guangdong, Sichuan, Jiangsu, Hu’nan, Zhejiang, Jiangxi, Anhui, Hubei, Fujian, Beijing and Shanghai.

3. Export

Argentina, Brazil, the U.S. and India are currently the largest soybean meal exporters in the world, with Argentina and Brazil ranking the top two. In the year of 2015/16, 71% of the world’s soybean meal export was from Argentina and Brazil, and around 16% from the U.S. India’s soybean meal export mainly goes to Southeast Asia, accounting for around 0.4% of the global export volume. The demand and supply landscape of soybean meal changed tremendously since mid 1990s. Before 1994, China was one of the major soybean meal exporters, with an annual export volume of over 1 million tons. However, as the domestic demand surged and the number of domestic soybean for oil extraction declined in the next several years, the production of soybean meal fell short of meeting consumption demands, making China one of the major importers. In the year of 1997/98, China imported 4 million tons of soybean meal.

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It was when China ramped up soybeans imports since 1999 to accommodate the needs of domestic capacity-expanding oil extraction plants, that the domestic output of soybean meal finally met China’s rocketing consumption demand. Export Volumes of the World’s Major Soybean Meal Exporters 1999/00-2015/16 Unit: 1,000 tons

Country 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10 /11 11/ 12 12/13 13/14 14/15 15 /16

Argentina 13,309 13,730 16,586 18,468 19,221 20,650 24,222 25,625 26,816 24,025 24,914 27,615 26,043 23,667 24,972 28,545 31,250

Brazil 9,950 10,673 11,8 6 2 13,657 14,792 14,256 12,895 12,715 12,138 13,109 12,985 13,987 14,678 13,242 13,948 14,390 15,600

China 49 155 1,123 843 662 658 357 867 634 1,017 1,181 472 966 1,365 2,017 1,595 1,850

India 2,469 2,363 2,573 1,510 3,675 2,243 4,268 4,143 5,285 3,808 3,117 4,800 4,391 4,354 2,742 1,072 250

U.S. 6,912 7,335 7,271 5,728 4,690 6,659 7,301 7,987 8,384 7,708 10,125 8,238 8,845 10 ,111 10,474 11,9 2 9 10,614

E.U. 177 253 332 346 399 533 714 544 422 464 471 609 884 536 296 362 400

Global 34,193 36,261 41,784 43,044 46,075 47,699 52,245 54,699 56,063 52,844 55,609 58,543 58,270 57,866 60,158 63,643 66,268

Source: U.S. Department of Agriculture Supply and Demand Balance Sheet of Soybean Meal in China 1999/00-2015/16 Unit: 1,000 tons

Production 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10 /11 11/ 12 12/13 13/14 14/15 15 /16

Import 13,170 16,170 15,000 21,695 20,012 26,490 27,425 27,385 30,310 33,400 39,350 43,300 47,200 49,555 52,670 56,583 59,723

Annual Supply 634 96 21 0 18 69 836 319 203 211 80 291 107 16 20 50 30

Feed Consumption 13,804 16,266 15,221 21,695 20,031 26,559 28,261 27,416 30,513 33,611 39,430 43,591 47,307 49,571 52,680 56,633 59,753

Other Consumption 12,500 15,000 14,500 19,061 19,834 24,300 26,300 26,100 29,000 31,500 35,500 40,000 45,000 47,500 50,500 53,500 56,000

Annual Domestic 500 550 580 600 650 850 1,000 800 850 950 1,000 1,200 1,300 1,400 1,400 1,450 1,500

Consumption 13,000 15,550 15,080 19,661 20,484 25,150 27,300 26,900 29,850 32,450 36,500 41,200 46,300 48,900 51,900 54,950 57,500

Export 29 107 1,051 795 632 633 331 836 595 996 1,149 434 927 1,323 1,993 1,500 2,000

Annual Demand 13,029 15,657 16,131 20,456 21,116 25,783 27,631 27,736 30,444 33,446 37,649 41,634 47,227 50,223 53,893 56,450 59,500

Annual Balance 775 1,109 -1,910 1,239 -1,085 776 630 -320 69 165 1,781 1,957 80 -652 -1,203 183 253

Source: National Grains and Oils Information Center

III. Major Factors Influencing Soybean Meal Price

(I) Soybean Meal Supply 1. Soybean Supply The supply of soybean meal, the by-product of soybean processing, is determined by the supply of soybean. Generally speaking, the increase in soybean supply leads to the increase in soybean meal supply. There are two main sources of soybeans, i.e. from home and from abroad. China’s soybeans are mostly produced in Northeast China, the Yellow River Basin

4 and the Huaihe River Basin. In recent years, China’s yearly production of soybeans hovers around 12 million tons, including 6 million tons of commodity soybeans. In the year of 2015/16, China’s soybean import will reach 80 million tons.

2. Soybean Price Soybean price has an immediate effect on the cost of soybean meal production. In recent years, as many large domestic oil extraction companies prefer imported soybeans, the price of imported soybeans is exercising even more influence on that of soybean meal.

3. Soybean Meal Production The current production of soybean meal is a variable subject to factors such as soybean supply, soybean crushing margin and production cost. Generally speaking, the production and price of soybean meal is negatively correlated, that is, the larger the production, the lower the price and vice versa.

4. Soybean Meal Stock Soybean meal stock, integral to total production, indicates whether soybean meal is in short supply. The price goes up when there is a shortage and goes down when there is an ample

supply. As soybean meal is not easy to preserve, the price will drop once the stock increases.

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(II) Soybean Meal Consumption

China is a large consumer of soybean meal with an annual growth rate of over 8% in recent years. As soybean meal accounts for 52% of poultry feeds, the price of livestock and poultry has an immediate effect on the demand of feeds. Generally speaking, there is a positive correlation between the price of livestock and poultry and that of soybean meal. According to statistics, over 90% soybean meal is used in producing various feeds. As a result, the demand of soybean meal will be boosted by a robust feeds industry and be suppressed by a week one.

(III) The Influence of Prices of Related and Substitute Goods

1. The price relations between soybean meal and soybean and soybean oil

Soybean meal is the by-product of soybean processing. Every ton of soybean produces approximately 0.18 tons of soybean oil and 0.8 tons of soybean meal. The price of soybean meal and soybean is closely related. Generally speaking, the price of soybean meal is affected by the yearly yield of soybean: the price goes down when it’s a bumper year and up when it’s a poor year. The prices of soybean oil and soybean meal are also related to a certain degree. The price of soybean meal goes down when that of soybean oil goes up. If soybean oil is unmarketable, the production of soybean meal will decrease, leading to an increase in soybean meal price.

Soybean crushing margin is one of the determinants of soybean meal supply. Some plants will halt production if the margin remains low, leading to an decrease in soybean meal supply.

2. The influence of the price of substitute goods

The price of soybean meal can be affected by the prices of substitute goods, such as cottonseed meal, peanut meal and rapeseed meal as well. Feeds companies will turn to the substitute goods if the price of soybean meal stays high.

(IV) Relevant Agricultural, Trade and Food Polices

New food policies, which are adopted by an increasing number of countries in response to the outbreaks of avian influenza, bovine spongiform encephalopathy (BSE) and foot-and-mouth disease (FMD), and the concern of the healthiness of GMFs, could have an immediate impact on the livestock breeding industry and the demand of soybean meal.

6 (V) Relevant Websites

Food and Agriculture Organization of the United Nations http://www.fao.org U.S. Department of Agriculture http://www.usda.gov American Soybean Association http://www.soygrowers.com CME Group http://www.cmegroup.com U.S. Grains Council http://www.grains.org Ministry of Agriculture of China http://www.agri.gov.cn China Animal Agriculture Association http://www.caaa.cn China Feed Online http://www.chinafeedonline.com China Feed Information http://www.china-feed.com China JCI http://www.chinajci.com 21Agri http://www.21agri.com China Soybean Online http://www.dadou.com.cn

IV. Measures of Risk Management of Soybean Meal Futures Trading

(I) Margin Requirements

The minimum trading margin of soybean meal futures contract is 5% of the contract value. The Exchange sets up different levels of margins which are increased with the size of open interest and the time approaching the delivery day.

1. Margins of Soybean Meal Futures Contract Approaching Delivery Day

Trading Date Levels of Margins (RMB/Contract) The 15th trading day of the month immediately 10% of contract value preceding the spot-month The 1st trading day of the spot-month 20% of contract value

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2. Margins of Soybean Meal Futures Contract with Different Sizes of Open Interest

The Exchange may increase the levels of margins subject to the increase of open interest of a contract, and release them to the market.

(II) Position Limits

The position limit refers to the Exchange-stipulated maximum amount of speculative positions of a certain contract that a member or client can hold.

Non-Spot-month Position Limits

(Unit: Contract)

Open interests Non-Brokerage members Clients

≤200,000 40,000 20,000

200,000 Unilateral open Unilateral open ＞ interests×20% interests×10%

Position limits from the month immediately preceding the spot-month to the spot-month (Unit: Contract)

Non-Brokerage Trading Date members Clients

From the 10th trading day of the month 10,000 5,000 immediately preceding the spot-month

The spot-month 5,000 2,500

The position limit for a futures contract in a certain period of trading will be implemented as of the time of settlement one trading day before the beginning day of such period of trading. Positions established for the purpose of hedging, which should go through the approval procedures, are exempted from position limit.

8 V. Procedures and Relevant Rules for Delivery of Soybean Meal Futures

(I) Major articles on delivery of soybean meal futures 1. The delivery warehouses designated for soybean meal are divided into the delivery warehouses on par and other delivery warehouses, including warehouses and factory warehouses. 2. When the soybean meal is delivered into the warehouse for delivery, the vendor should provide to the delivery warehouse the following material:

① The manufacturer of the soybean meal;

② The manufacturing date of the soybean meal;

③ Product quality tester; ④ The certification and identification showing whether they are genetically modified products;

⑤ The photocopy of the manufacturer’s quality testing report.

3. The packages of the soybean meal should be the new woven sacks. Each package of the soybean meal must be printed with the marks of the product name, the manufacturer’s name, address and phone number, and the weight. The woven sack must be sewed with the label printed with the manufacturing date. 4. The number of the packages of the soybean meal should not be calculated. The packing prices of the woven sacks should be included in the contract trading price.

(II) Delivery Expenses

1. The delivery fee for soybean meal is 1 CNY/MT. 2. The charging standard for warehousing and dissipation costs is CNY 0.5 per day per ton. 3. The inspection fee for soybean meal is 3 CNY/MT. 4. A price ceiling is implemented for the delivery-in and delivery-out fees.

(III) Procedures for Delivery of Soybean Meal Futures

1. The delivery of soybean meal futures can be conducted in the forms of exchange of futures for physicals (EFP), rolling delivery and one-off delivery. 2. Delivery workflows

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Flow Chart of EFP

Time Flow Notes Applications for EFP by warehouse receipts on par shall be The seller and the buyer shall apply for EFP submitted with the right amount of payment and receipts. by submitting Application Form of Delivery fees of EFP by warehouse receipts on par will be Exchange of Futures for Physicals, the Before 11:30 examined and approved on the very same day upon physicals sale and purchase agreement, the receiving of the application; Trading fees of EFP by other of the applicable certification of the payments, the warehouse receipts are examined and approved within three application day applicable certification of the warehouse days upon receiving of the application. The eligible period receipts on par, the entrance receipts, the for EFP is the time from the launch day of the contract to inventory receipts and other goods the third to the last trading day (including the very same ownership certifications. day) of the month preceding the spot-month. Positions of EFP shall be deducted from the open interests of that very day, and the trading result shall not be counted After the close of The positions of eligible buying and selling applicants in the opposition directions shall into the settlement price and trading volume of that very the application day be closed out at the negotiated price. day. After ending of each trading day, the Exchange will publish the EFP information of that very day. The transfer of goods and payments in EFP by other warehouse receipts shall be negotiated and settled by both trading parties. With respect to the warehouse receipts on par EFP, the Exchange shall Value-Added Tax invoices shall be handled according to After the settlement handle the handover of the warehouse the relevant rules in the Detailed Settlement Rules of of the approval day receipts on par and the payment of the Dalian Commodity Exchange. payments. After the settlement of the approval day, the Exchange shall pay the payments to the seller and issue the Voucher of Warehouse Receipts On Par to the buyer.

Note: For detailed procedures, see Detailed Delivery Rules of Dalian Commodity Exchange.

Flow Chart of Rolling Delivery (As of the first trading day of the spot-month through the trading day immediately preceding the last trading day of the spot-month)

Time Flow Notes The seller who declares the delivery shall hold both the Trading hours The seller and the buyer declare the delivery. warehouse receipts on par and the one-way selling positions of on matching day the spot-month. The buyer who declares the delivery shall hold the one-way buying positions of the spot-month. If a client’s quantity of positions is smaller than that of its declaration intent, or it has both buying and selling positions (including positions held under the same client number at other members), it declaration intent shall be invalid. If the selling intent is smaller than the buying intent, the buying intent will be Market closing Liquidation after confirmation of the transacted with the equal selling intent according to the on matching day valid declaration intent of the buyer and declaration time sequence of the intent. If the selling intent is the seller. larger than the buying intent, the buying intent will all be transacted and the difference will be matched with the buying positions with the longest holding time. Matched positions will be deducted from the positions of the contract in the spot-month, and will thus neither be restricted by the position limit nor be calculated into the trading volume. The settlement price of the then-current day shall be the delivery settlement The seller and the buyer can inquire about the corresponding Settlement price for rolling delivery and be used to on matching day Delivery Pair Table in the Member Service System and in the calculate the profit or loss of the “data service/ statistical data” section of the website of the liquidation. The buyer’s trading Exchange. The margins of the matching seller shall be returned. margins shall be transformed to be the delivery payments. Settlement on The buyer shall make up the payments Value-Added Tax invoices shall be handled according to the handover day in full before closing of the market. relevant rules in the Detailed Settlement Rules of Dalian (the second After settlement, the Exchange will Commodity Exchange. The rolling delivery default refers to the trading day issue the Voucher of Warehouse buyer’s failure to fully pay the payments within the prescribed following the Receipts On Par to the buyer without period. Any delivery default shall be handled subject to the matching day) default, and pay 80% of the delivery applicable provisions on delivery default in the Detailed Delivery payments to the seller. Rules of Dalian Commodity Exchange. Note: For detailed procedures, see Detailed Delivery Rules of Dalian Commodity Exchange.

10 Flow Chart of Rolling Delivery (Last trading day)

Time Flow Notes Natural persons shall not be allowed to participate in the delivery; the offsetting positions held under the After the settlement The Exchange matches the contracts same trading code shall be closed out at the delivery of the that remain open on the principle of settlement price; after matching, the members can last trading day “Least Matched Pairs”. inquire about the corresponding Delivery Pair Table in the Member Service System and in the “data service/ statistical data” section of the website of the Exchange. The buyer shall complete the The seller shall issue VAT invoices to the buyer whose Before 15:00 payment of commodities; the seller of the shall submit all corresponding name is provided in the Delivery Pair Table; prices of last delivery day warehouse receipts on par and VAT commodities traded in the Exchange include taxes, invoices. which is also true of prices of packaging materials. The Exchange shall allocate The corresponding storage fees of the warehouse 15:00 on the last warehouse receipts, and transfer the receipts on par on the very day shall be paid by the delivery day payments and warehouse receipts on buyer. Defaults shall be handled according to the par of the buyer and the seller who relevant rules in Detailed Delivery Rules of Dalian have not defaulted. Commodity Exchange. The buyer who hasn’t defaulted claims the Voucher of Warehouse Receipt with the After 15:00 receiving of payment issued by the Sellers who haven’t submitted VAT invoices shall be of the settlement department. dealt with according to the Detailed Settlement Rules last delivery day The seller who hasn’t defaulted and who has of Dalian Commodity Exchange. submitted corresponding VAT invoice gets the full amount of payment.

Note: For detailed procedures, see Detailed Delivery Rules of Dalian Commodity Exchange.

3. One-off Delivery (1) Definition After the last trading day of the contract, all non-liquidated contract holders must perform the contracts through delivery; and the portions of positions corresponding to the buying and selling positions under the same client number shall be deemed to be automatically liquidated, no delivery shall be handled therefor and the liquidation price shall be calculated as per the delivery settlement price.

(2) Delivery Workflows (3) Notes ① All the products listed on the Exchange may adopt one-off delivery. ② The delivery settlement price shall be the weighted average price of all transaction prices of the futures contract during the period as of the first trading day of the spot-month through the last trading day. ③ The VAT special (ordinary) invoice shall be issued by the delivery selling client to the appropriate buying client; and the VAT special (ordinary) invoice issued by the client shall be forwarded, obtained, and confirmed with assistance from, the members of both parties. ④ Any Member’s delay or failure in submission of the VAT special (ordinary) invoice shall be handled subject to the applicable provisions of the Detailed Settlement Rules of Dalian Commodity Exchange.

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Flow Chart of One-off Delivery

Date Time Buyer Seller The Exchange Transform the trading margins of Last trading After the buying positions of the day market spot-month to be the delivery closing advances The 1st trading Before Submit to the Exchange all day after the the warehouse receipts on Market par corresponding to its last trading day Closing spot-month (The day for submitting the After Publish such information as the warehouse products delivered at each delivery market warehouse and the quantities of the receipts on par closing warehouse receipts on par The 2nd Before Declare the delivery intent to the Exchange trading day Market according to the information published by after the last Closing the Exchange trading day After the determination of the Carry out delivery matching, and the (The After matching result, the buyer matching result and other information market shall, within one trading day will be sent to the buying member matching closing and the selling member through the day) after the matching day, notify member service system. the seller of the items related Additionally pay the Before to issuance of the VAT Submit the VAT special The 3rd balance payments invoice within seven trading day Market special invoice, including the corresponding to its Closing name, address, taxpayer’s spot-month contract days after matching after the last registration number, amount positions trading day and other information, in (The After accordance with the Issue to the buying member the handover market provisions of the tax Voucher of Warehouse Receipts day) closing authorities. on Par

Note: For details, see Detailed Delivery Rules of Dalian Commodity Exchange. 4. Delivery Comparison

Rolling Delivery Rolling Delivery EFP (As of the first trading day of the spot-month through the trading (Last trading day) day immediately preceding the last trading day of the spot-month)

As of the contract listing date through the As of the contract listing last but three trading day (inclusive) of the date through the last but Handling month preceding the spot-month.As of the three trading day (inclusive) Last trading day time first trading day of the spot-month through of the month preceding the the trading day immediately preceding the spot-month. last trading day of the spot-month

Matching Negotiated by the buyer and The day when the seller submits the After market closure the seller and within the application for rolling delivery of last trading day time handling period Priority goes to sellers, buy positions with Negotiated by the buyer and Matching delivery intent, and buy positions with “Least Matched Pairs” the seller principle longest holding time

Settlement Negotiated by the buyer and price the seller Settlement price of the matching day Delivery settlement price Negotiated by the buyer and Seller priority principle: qualified sellers Match after market closure the seller; with either are ensured of successful matching on the Main of last trading day; warehouse receipt on par EFP very day when they submit their features centralized handling of or non-standard warehouse applications. The buyers matched shall pay delivery by the Exchange receipt EFP on time. Note: For details, see Detailed Delivery Rules of Dalian Commodity Exchange. (IV) Flow of Receipts Delivered at Warehouse and Factory Warehouse The soybean oil warehouse receipts on par of the Exchange, issued by the designated delivery warehouses, are divided into warehouse receipts on par and factory warehouse receipts on par.

12 1. Flow of Warehouse and Factory Warehouse Receipts

Clients entrust Flow of Warehouse Receipts on Par broker members or Pick up goods at Non-Brokerage designated delivery member warehouse with ID Pledge Transfer Offset

30 days after the delivery forecast. card and letter of introduction Goods wil be delivered within

Plan to generate warehouse receipts

Notification of Voucher of Delivery forecast Delivery Cancellation Warehouse Receipts

DCE entrusts quality Delivery-in testing agencies to re-inspect. Warehouse or factory warehouse issues Members on behalf Registration of clients (or Non- Warehouse Application Brokerage members) Inspection Qualified Form of handle warehouse Warehouse receipts on par Receipts on Par. registration at the Delivery Department.

Plan to generate factory warehouse receipts

When the futures products under the warehouse receipts on par have been transferred to be physicals or after the cash withdrawal with the Registration Application Form of Warehouse Receipts on Par, the clients will no longer need to handle the delivery forecast, though re-inspection is a must, if they want to re-generate the warehouse receipts on par at the same warehouse. 2. Flow: Registration of warehouse receipts: The buyer pays the fees including that to purchase the soybean meal to the oil factory, which will then issue the Registration Application Form of Warehouse Receipts on Par to the seller before the Exchange allows registration upon examination of such items as the letter of guarantee. Receipt of warehouse receipts: During the delivery, the seller issues warehouse receipts and VAT invoices and receives the payments for goods, while the buyer pays for the goods and receives the warehouse receipts. Cancellation of warehouse receipts: Holders of warehouse receipts shall handle the procedures for cancelation of warehouse receipts at the Exchange to confirm the oil factories for picking up goods and receive the Notification of Delivery. Goods pick-up: The vendor shall pick up the goods at the factory warehouse within 4 days from the day of issuance (inclusive) of the Notification of Delivery, and the factory warehouse shall arrange for loading out of the goods according to relevant regulations. (For details, see Measures for Warehouse Receipts on Par Management of Soybean Meal, Soybean Oil, RBD Palm Olein, Coke, Coking Coal, Iron Ore and Egg of Dalian Commodity Exchange.) Note: All warehouse receipts on par of soybean meal must be cancelled before the last business day of each March, July and November.

13 Soybean Meal Futures Trading Manual

Annex 1: DCE Soybean Meal Futures Contract

DCE Soybean Meal Futures Contract

Product Soybean Meal

Trading Unit 10 MT/contract

Price Quote CNY/MT

Tick Size 1 CNY/MT

Daily Price Limit 4% of last settlement price

Contract Months Jan, Mar, May, Jul, Aug, Sep, Nov, Dec

9:00 - 11:30 am, 1:30 - 3:00 pm Beijing Time, Monday Trading Hours to Friday, and other hours noticed by DCE

Last Trading Day 10th trading day of the spot-month

Last Delivery Day 3rd business day after the last trading day of the spot-month

Deliverable Grades DCE Soybean Meal Delivery Quality Standard

Delivery Location The warehouses appointed by DCE

Trading Margin 5% of the contract value

Trading Fee No more than 3 CNY/contract

Delivery Method Physical delivery

Ticker Symbol M

Exchange DCE

14 Annex 2: DCE Soybean Meal Delivery Quality Standard

DCE Soybean Meal Delivery Quality Standard （F/DCE D001-2006）

1. Content and Scope 1.1 The Standard herein dictates the quality requirements, testing methods, inspection rules, labeling, packaging, transportation and storage for soybean meal futures contracts delivered at DCE. 1.2 Soybean meal dictated in DCE’s soybean meal futures contract refers to soybean meal for feeding that is produced after soybean oil extraction by way of crushing and leaching or leaching. There is no limit on production location. 1.3 The standard herein applies to soybean meal futures contracts on par delivered at the DCE. 2. Cited Rules Subject to the relevant rules of GB/T19541—2004 3. Terms and Definitions Subject to the relevant rules of GB/T19541—2004 4. Quality Requirements 4.1 Sensory characteristics: Pale brown or light yellow irregularly shaped pieces; powder or granular; not fermented or moldy; no extruding agglomerations, moth-eaten sections, or odors/smells. 4.2 Impurities and sundries: subject to the relevant rules of GB/T 19541—2004 4.3 Quality guidelines for products on par

Table 1

Urea activity Item Moisture Crude Protein Crude Fiber Ash Content (ammonia nitrogen) (%) (%) (%) (%) [mg/(min.g)]

Par ≤13.0 ≥43.0 ≤7.0 ≤7.0 ≤0.3

Note: Crude protein, crude fiber and ash content should be calculated based on 87% dry material.

4.4 Sanitation standard: subject to the relevant rules of GB/T 19541—2004 5. Testing methods, inspection rules, labeling, packaging, transportation and storage Packaging: subject to the relevant rules of Detailed Delivery Rules of Dalian Commodity Exchange for Soybean Meal, Corn, Soybean Oil and No. 2 Soybean; Testing methods, inspection rules, labeling, transportation and storage: subject to the relevant rules of GB/T 19541—2004 6. Additional Notes 6.1 The DCE is responsible for the interpretation of the standard herein. 6.2 The standard herein shall be implemented starting from the March contract in 2007.

15 Soybean Meal Futures Trading Manual

Premium and Maximum of Daily Delivery Discount Shipment Warehouse Delivery Warehouse (CNY/MT) No. Name Address Postcode Contact Tel. Station Receipts on Speed on Par Compared with Annex 3: List of Designated Delivery Warehouses for DCE Soybean Meal Par (MT) (MT/Day) (Yes/No) Delivery Warehouse on Par Haibin No.5 Rd., Rizhao 0633-3988280 Railway: Rizhao Bunge Sanwei Oil & Fat Station List of Designated Delivery Warehouses for DCE 8 Economic Development 276826 Qin Bo 0633-3988810(F) 15000 1000 No -30 Co., Ltd. Zone, Shandong Shipping: Rizhao Soybean Meal (Warehouses) Province 13506336735 Port Jiusan Group Tianjin 266 Xin’gang Avenue, 022-66271996 Railway: Tianjin New Premium and 9 Soybean Technology Co., Tianjin Port Free Trade 300461 Li Gang 022-66271988(F) Port Station 45000 3000 No -50 Delivery Discount Shipping: Tianjin Port Contractual Ltd. Zone 13752197872 No. Name Address Postcode Contact Tel. Shipment Station Delivery Warehouse (CNY/MT) Capacity Area on Par Compared with (Yes/No) Delivery (MT) Dongguan Fuzhiyuan Yinghuataiying Industrial 0769-88436102 Zone, Hongmei Town, Zhang Warehouse on Par 10 Feedstuff Protein 523166 0769-88436011-904(F) Shipping: 22500 1500 No 0 Development Co., Ltd. Dongguan, Guangdong Lisong Fuzhiyuan Dock Zhangjiagang Storage & Province 13802371105 Transportation No.1, Wusi Jieqiao, 0512-58388066 Shipping: River & Ocean 1 Department of Jiangsu Jin’gang Town, 215634 Xu Wen 0512-58380903(F) Zhangjiagang River Zhangjiagang Yes 0 10000 214 South Yuelong Rd., Tao 0513-81193335 Shipping: Langshan Zhangjiagang, & Ocean Cereals and 11 Nantong Noble Grain and 226004 30000 2000 Yes 0 River & Ocean Cereals 13906249916 Warehouse Area Protein Co., Ltd. Nantong, Jiangsu Yuxian 0513-85719527(F) Port, Nantong and Oils Trade Co., Ltd. Jiangsu Province Oils Dock Province 13921464604 Zone 1, Port Affairs Nantong Grains & Oils Shipping: Dock of Nantong Grains Bureau, 1 Youyi Rd., 0759-2227021 Railway: Zhanjiang Transportation Co., Ltd. 62 Rengang Rd., 0513-83554727 Chinatex Grains & Oils Zhu Station 2 226006 Zhang Jie Nantong Grains & & Oils Yes 0 10000 12 Xiashan District, 524027 Zhiguo 13859213090 30000 2000 No 0 of China Grain & Nantong, Jiangsu 13912286772 Oils Transportation Transportation (Zhanjiang) Co., Ltd. Zhanjiang, Guangdong Shipping: Zhanjiang Logistics Corporation Province Co., Ltd. Warehouse Area Province 0759-2227878(F) Port Tongxing Rd., Nantong Railway: Nanjing Economic and Cargill Grains & Oils 226009 Chen 0513-85966020 Shipping: 37500 2500 Yes 0 South Railway 13 Technological Yun Wushang Village, Station, Shanghai (Nantong) Co., Ltd. Development Zone, 13951302082 Yingchuan Port Tiexinqiao Town, 025-52890848 Nan jing Nanjing Tiexinqiao State Zhou Railway Bureau Jiangsu Province 3 Yuhuatai District, 210012 025-52890972(F) Shipping: Dock of Tiexinqiao Yes Grain Reserve Qianchao Warehouse 0 10000 Xinsha Industrial Zone, 0769-88235178 Nanjing, Jiangsu 13851421688 Tiexinqiao State Grain Chinatex Grains & Oils Area 14 Machong Town, 523147 Guo 13412562657 Shipping: Xinsha 15000 1000 No 0 Province Reserve, Nanjing (Dongguan) Co., Ltd. Dongguan, Guangdong Changbo Port Grain Bureau, Province 0769-88235181(F) Qinhuai New River Xinsha Industrial Zone, 0769-82661731 Railway: Xinsha Machong Town, Note: The contractual capacity refers to the minimum guaranteed warehouse capacity in the agreement signed by the delivery warehouses with the Exchange. The actual storage of goods 15 Dongguan Cargill Grains 523147 Bao Yijie 0769-88239556(F) Station 15000 1000 No 0 by a delivery warehouse may exceed the contractual capacity. & Oils Co., Ltd. Dongguan, Guangdong Shipping: Xinsha Province 15622280377 Port 3-6 Yan’gang Avenue, 0769-82661731 Cargill Grains & Oils 16 Yangjiang Port, 529533 Bao Yijie 0769-88239556(F) Shipping: Yangjiang 18000 1200 No 0 List of Designated Delivery Warehouses for DCE (Yangjiang) Co., Ltd. Yangjiang, Guangdong liang Port Province 15622280377 Soybean Meal (Factory Warehouses) Xinsha Port Back 0769-88236688-1164 Railway: Xinsha Sinograin Oils & Fats Zhang 17 Industrial Zone, Machong 523147 0769-88230388(F) Station 18000 1200 No 0 Industrial Dongguan Co., Town, Dongguan, Youhong Shipping: Xinsha Premium and Ltd. 13829192825 Maximum of Daily Delivery Discount Guangdong Province Port No. Name Address Postcode Contact Tel. Shipment Station Warehouse Delivery Warehouse (CNY/MT) Li Ning 0633-2166266/168 Railway: Rizhao Receipts Speed on Par Compared with 157 Haibin No.5 Rd., 0633-2166299(F) on Par (MT) Delivery 18 Chinatex Grains & Oils 276826 Station 20250 1350 No -30 (MT/Day) (Yes/No) (Rizhao) Co., Ltd. Rizhao, Shandong Shi 18263328577 Shipping: Rizhao Warehouse on Par Province Wannian 13792028121 Port Science & Technology COFCO Xinsha Grains 0769-81257476 Railway: Dedicated Line of 1306 Bohai No.40 Rd., 022-25618368/358 Industrial Park, Xinsha Chen Ma Long & Oils Industry 523147 Xinsha Port, Xiayuan BGO (Tianjin) Grain & Lingang Economic 022-25618380(F) 1 Port, Machong Town, Sulan 13928922223 Station, Guangzhou 20000 1350 No 0 19 300452 Shipping: Lingang 20250 1350 No -50 (Dongguan) Co.,Ltd. Dongguan, Guangdong 0769-88236050(F) Oils Industrial Co., Ltd. Zone, Binhai New Area, Wang 18512212611 Port Province Shenzhen Railway Tianjin Hongjie 18512212766 Science & Technology 0511-81996632/44 Dongguan Cargill 0769-82661731 Railway: Dedicated Line of Guo Shipping: Industrial Park, Xinsha Liangshan Village, 0511-81996630(F) 2 Feeding Protein Port, Machong Town, 523147 0769-88239556(F) Xinsha Port, Xiayuan Sinograin Zhenjiang 212006 Hongfeng Sinograin Dock 18000 1200 Yes 0 Bao Yijie 12000 800 No 0 20 Jianbi Town, Zhenjiang, 15051116866 Railway: Technology Co., Ltd. Dongguan, Guangdong 15622280377 Station, Guangzhou Grains & Oils Co., Ltd. Jiangsu Province Province Shenzhen Railway Zhang Jie 13861350613 Zhenjiang Station 0512-58389121 Shipping: North Shugang Rd., 0523-86991728 Shipping: Yihai COFCO Eastsea Oils & 1 Donghai Rd., Jin’gang Wang Yong’anzhou Town, Cheng 3 Town, Zhangjiagang, 215634 0512-58388235(F) Zhangjiagang Eastsea Yihai (Taizhou) Grains & 225400 0523-86991319 (F) Grains & Oils 30000 2000 Yes 0 Grains Industries Yinfang Oils & Grains 60000 4000 Yes 0 21 Oils Industrial Co., Ltd. Gaogang District, Linjuan Dock (Zhangjiagang) Co., Ltd. Jiangsu Province 13115110095 Taizhou, Jiangsu 15295279725 Specialized Dock Province Railway: N/A Shipping: 0523-87926769 025-84798199 9 Yanjiang Rd., Taixing Zhangjiagang River 1 Baodao Rd., Jin’gang Zhangjiagang River & Taixing Zhenhua Oils Shipping: Dock at 4 & Ocean Cereals and Town, Zhangjiagang, 215634 Xu Wen 025-84799258(F) 27000 1800 Yes 0 22 Economic Development 225404 Li 0523-87926751(F) Guochuan Port 30000 2000 Yes 0 Oils Industry Co., Ltd. Ocean Cereals and Oils Co., Ltd. Xiaohui Jiangsu Province 13906249916 Dock Zone, Jiangsu Province 18061888001 Railway: N/A Railway: 8 Dedicated Lines 510 Bohai No.40 Rd., 022-25618208 Shipping: Lin’gang Yihai (Lianyungang) Dagang Rd., Xugou, Zhu of No.4 Company of COFCO Excel Joy Grains & Oils Dock 5 222042 0518-82387266 Zhongyun (Ji) Port Bureau 23 Lin’gang Economic 300452 Xu Li 022-25618209(F) 20250 1350 No -50 Grains & Oils Industries Lianyungang, Jiangsu Xiongliang 13971088817 48000 3200 No -30 (Tianjin) Co., Ltd. Zone, Binhai New Area, Railway: Tanggu Co., Ltd Province Shipping: No.65 Berth of 13602031376 Lianyungang Port Tianjin Station 2068 Bohai No.40 Rd., 022-59585888-166 Shipping: No.10 COFCO Yellowsea Oils Gangbei, Lanshan, 0633-2639066 Railway: Dedicated Jin Tianyuan (Tianjin) Lines at Lanshan Station 24 Food Technology Co., Lin’gang Economic 300452 022-59855800(F) Dock, Tianjin Port 20250 1350 No -50 6 & Grains Industries Rizhao, Shandong 276808 Yang Qing 0633-2639065(F) 12000 800 No -30 Zone, Binhai New Area, Liu Qian Railway: Sanbaidun (Shandong) Co., Ltd. Province 13561906170 Shipping: Lanshan Port Ltd. Tianjin 13821904621 Station Science & Technology 1 Xinliang Rd., South Railway: Rizhao Port 0769-82922441 Shandong Xinliang Oil End of Haibin No.5 Rd., 0633-2216076 Louis Dreyfus (Bazhou) Industrial Park, Xinsha Port, Lai Shipping: 7 276826 Niu Zhen Shipping: Rizhao Port 12000 800 No -30 25 Feed Protein Co., Ltd. 523147 13501500286 22500 1500 No 0 Processing Co., Ltd. Rizhao, Shandong 15806337544 Container Company Machong Town, Dongguan, Jianli Xinsha Port Province Guangdong Province 0769-88280667 (F) 16 Annex 4: DCE Soybean Meal Price Daily Chart

DCE Soybean Meal Price Daily Chart 2012.1-2015.12

A 4-month continuous decline from May The only strong rebound of the U.S. 23 to the end of Sept. 2014 ended the soybean market in 2015 came in the weather-based market speculation. latter half of June. In the last 2 weeks of Thanks to the unexpected good June 2015, the main production areas weather, the U.S. soybeans' yield of per of the U.S. soybeans were stricken by Sep.-Nov., 2012, price of unit area increased constantly. As a excessive rainfalls, delaying sowing in Dalian soybean meal result, the futures price of the U.S. some areas for a long time. The Jan.-Apr., 2012, price slumped as American of Dalian soybean soybeans slumped. With the end of January contracts of the U.S. soybeans soybeans entered a weather-based speculation in the rebounded by 16.3% to 1,050 cents per meal rose steadily as long-term bear market previous 3 years, the global stock of bushel from 903 cents per bushel. American soybean when effective rainfall soybeans saw a quick recovery. However, the report of July released production was came in the later growth later did not show the sowing area was reduced due to the period of the soybeans. decreased due to the excessive drought weather in rainfalls. The report of August, though South America. cutting the sowing area, increased the yield per unit area of the U.S. soybeans. After that, the yield per unit area was continuously lifted, which suppressed the U.S. soybean market. China’s soybean meal market, generally synchronized with the U.S. soybean market, saw an even weaker trend.

Jun.-Sep., 2012, American soybean production was cut from 87m to 71.69m tons as the U.S. suffered a dry weather never seen in the past 50 years flowing the drought in South America.

2012/02days 2012/08 2013/02 2013/08 2014/02 2014/08

17 DCE Investor Education Material Futures Trading Manual Series

Dalian Commodity Exchange

SOYBEAN MEAL FUTURES TRADING MANUAL DCE Investor Education Material Futures Trading Manual Series

www.dce.com.cn Add: 129 Huizhan Road, Dalian, Liaoning Province, China 116023 Tel: +86-411-84808888 Fax: +86-411-84808588

Service & Consultation：

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6nd Edition, 2016

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