Zhengzhou Commodity Exchange, ZCEX, one of the three futures exchanges in the nation, said it will start trading rapeseed oil futures contracts from today.

Rapeseed oil is a key material in the production of biological diesel oil, which is gaining wider use as an alternative fuel as oil prices rise.

The demand for rapeseed in China for the production of alternative fuel is expected to increase rapidly in coming years.

The debut of rapeseed oil futures is part of the Zhengzhou Exchange's long-term plan to expand the range of trading products.

Rapeseed oil futures is the first new instrument launched by ZCEX this year. Other commodity futures traded on the exchange include wheat, cotton, sugar and Pure Terephthalic Acid (PTA), a petroleum-based chemical.

The trading unit of rapeseed oil futures contracts is set at 5 ton per hand valued at about 40,000 yuan at current prices. The tick value, or the minimum price movement, is 2 yuan per ton and the minimum trading margin is 5 percent of the contract value.

The new contract also specifies the daily price swing limit at 4 percent, based on the price on the previous trading day. The months of delivery for contracts are June, March, May, July and September, all of which fall within the peak seasons for rapeseed oil trading in the cash market.

Ma Xiaofei, an analyst on agricultural commodities with China International (Shanghai) Futures Co, said: "Trading of rapeseed oil futures will help to establish a public, competitive and transparent national pricing system that serves as a reliable benchmark for sales and production activities."

Such a price benchmark can help stabilize the rapeseed market, which has been subject to wide price fluctuations since October.

"It's good news for enterprises involved in rapeseed oil processing in China. They have been provided with an access to hedge against unpredictable price changes."

As the biggest producer and consumer of rapeseed oil in the world, China faces an increasing demand from both upstream and downstream enterprises to hedge risks.

The average annual production of rapeseed oil in China is 4 to 4.7 million tons and the annual consumption is 4.3 to 4.8 million tons.