The futures contract provides the means to manage price risk of AJC.  If your company is a buyer of AJC, price risk represents the risk that prices rise before you can procure the AJC you need to fulfill commitments made by your company to the retail marketplace.  For a processor, price risk represents the risk that prices decline between the time he purchases fruit and the time he sells the concentrate.  For both parties, this is about improving the ability to lock in margins as a safeguard against adverse price movements.  Historically, the industry has used cash market forward contracts of up to a year's duration, to mitigate supply risk.  Forward contracts have inherent limitations in their effectiveness and availability, making them a less dependable alternative.  For example, one of the problems with forward contracts is if prices move significantly after the price is fixed, the price used may be materially different than the current market, thereby creating a seeming disadvantage to one of the parties. Using futures based contracts avoids this as the price utilized is always relative to the current cash market (plus/minus a negotiated difference for specific product quality). This is the main reason the industry expressed interest in a better tool, namely a listed futures market for AJC.

Additionally, regulated futures contracts remove counter party risk, a favorable alternative to the inherent risks often associated with forward pricing.   

2. Are the Chinese suppliers interested in this? 

Several of the large Chinese processors participated on the Juice Products Association AJC Futures subcommittee and have been helpful in developing the contract.  Some of these processors expressed their general interest in exploring business model improvements, understanding the needs of buyers and also indicated their willingness to consider entering into futures based agreements on an exchange.

3. Who will make sure product is delivered on the contract?  

When MGEX introduces the AJC futures contract it is expected that most buyers will continue to work with their choice of suppliers for their physical product.  While taking delivery from the futures market is an option, it will not meet the needs of most buyers because of the wide specification range.   

However, if a buyer does choose to take delivery from the futures market the delivery of AJC is guaranteed by the Exchange's rules.