The 8th is the first anniversary of the listing of pig futures, China’s first animal husbandry futures variety and live delivery variety. On January 8, 2021, pig futures were listed on the Dachang stock exchange. Over the past year, pig futures have operated steadily and industrial customers have actively participated. Especially in the downward cycle of pig prices this year, pig futures and the spot market go hand in hand, effectively help the industry resist the risk of price fluctuations, ensure breeding profits, and play a positive role in promoting the stable supply and price of China’s pig industry and improving the long-term mechanism for the stable and orderly development of the pig industry.
provide good price guidance and actively participate in
The listing of pig futures marks another solid step in the in-depth development of China’s futures market. According to statistics, as of January 7, 2022, the cumulative trading volume of pig futures was 6166900, the turnover was 1.74 trillion yuan, the average daily position was 60800, and the delivery of lh2019 and lh2111 contracts was 54. The closed loop of the whole business process was successfully completed, and the relevant rules, systems and process design were comprehensively tested by the market.
It is understood that the listing of pig futures coincided with the downward cycle of China’s pig spot market. During this period, the overall operation of pig futures was stable, and the turnover and position increased steadily. A pattern of “gradual participation of industry and gradual exertion of price discovery and hedging function” was basically formed, which played an important role in helping the industry avoid the risk of this round of price decline.
Specifically, the transaction and position of pig futures show a state of continuous growth, and the price fluctuation is more rational than that of spot, which can reflect the market’s expected changes in future prices. When the spot price is high in January, the futures price shows a discount, while when the spot price falls to the bottom in June and July, the futures price shows a premium, This provides good price guidance for production and consumption enterprises in the pig industry, and also mitigates the excessive fluctuation of spot prices to a certain extent. At present, more than 2500 unit customers (excluding asset management and special law customers) participate in futures trading and delivery, and more than 90 breeding enterprises have applied for hedging qualification. The situation of large breeding enterprises using the futures market has basically taken shape, and small and medium-sized farmers mainly participate in “insurance + futures” projects.
focus on large industrial demand, take many measures and do everything in parallel
Since this year, although China’s pig industry is in the downward stage of the pig cycle, the confidence of pig breeding operators is increasing, and the whole pig industry has also developed steadily. This is not only the result of the active linkage of all parties in the market to jointly help ensure the supply and price stability, but also thanks to many measures taken by large commercial institutes to ensure the stable function of pig futures.
It is reported that after the listing of pig futures, Dachang exchange has deeply practiced “I do practical things for the masses”. On the basis of ensuring the safe and stable operation of pig futures, Dachang exchange has met the hedging needs of various subjects of the industry by adjusting the hedging amount, designing diversified delivery services and promoting the “Dachang agricultural insurance plan”, so as to effectively do practical things for enterprises and help the industry solve problems, It has promoted the healthy and stable development of pig industry.
First, for large-scale breeding enterprises with large position demand, they can apply for the special hedging limit for industrial customers from the big commercial exchange and appropriately relax the position limit, so as to meet the hedging demand of large-scale breeding enterprises for the futures market on the premise of strict risk control.
Second, continue to increase delivery warehouses to meet market delivery needs. At the initial stage of listing, 14 delivery warehouses were set up in the eastern region divided by the national regional policy of the Ministry of agriculture and rural areas. In June this year, five delivery sites were added as delivery warehouses in the eastern region where Dashang is located. In August, four delivery sites were further added in Henan and Hubei, increasing the designated delivery warehouses of pig futures to 23 delivery warehouses of 15 enterprises. In addition, Dachang exchange also released the premium of 9 pig futures delivery areas such as Hebei and Shaanxi, so as to prepare for the next step of adding delivery warehouses in these areas.
Third, strengthen the delivery extension service and solve the problem of handling after the buyer receives the goods. Under the current situation of “point-to-point” inter provincial transportation, in order to solve the problems that may be difficult for the buyer to deal with after receiving pigs for futures delivery, Dachang exchange has designed alternative delivery schemes such as negotiated settlement, farm repurchase and over-the-counter trading, communicated with all pig delivery warehouses, and the pig delivery warehouse helps the receiving buyer coordinate logistics and slaughtering resources, It is convenient for the buyer to deal with pigs. From the actual delivery of the contract in September and November, among the 54 delivery pairs, 17 were delivered by the buyer by agreement, 1 was repurchased by the delivery library, 5 were using logistics vehicles recommended by the delivery library, and 13 were recommended by the delivery library for slaughtering enterprises to deal with pigs. Relevant measures play a significant role in serving the market and improving delivery efficiency.
Fourth, carry out simulated delivery and training to help the industry make better use of pig futures. In order to guide all kinds of subjects to fully and accurately understand the delivery rules of pig futures, participate scientifically and rationally, and ensure the smooth delivery of pigs, after the listing of pig futures, Dachang’s main pig producing areas across the country have organized 230 training activities, and promoted the delivery business in a three-dimensional manner by making delivery manuals, shooting delivery teaching videos, making delivery long maps, etc; Joint delivery warehouses and quality inspection institutions have carried out 13 simulated deliveries in Henan, Jiangsu and other places to comprehensively inspect the on-site delivery and settlement process.
Fifthly, considering that the industry will probably be affected by the downward cycle of pig price this year, Dachang will strengthen its support for projects to protect pig price in this year’s agricultural insurance plan, and guide institutions to focus on serving small and medium-sized farmers, so as to make pig futures the first variety included in the agricultural insurance plan in the year when Dachang is listed. At present, in 2021, there are 131 pig futures price projects under the “farmers\’ income security plan of Dachang Institute”, covering 31 provinces and nearly 10000 farmers in China.
the industry has benefited a lot, and there is a huge growth space for pig futures in the future
At present, the two functions of “price discovery” and “risk aversion” played by pig futures are gradually benefiting all subjects of the industrial chain. Through nearly a year’s attention and participation, pig breeding enterprises and farmers have positively evaluated and highly affirmed the operation and function of pig futures market, and also expressed their expectations for the future development of pig futures.
Jiang Guojin, chairman of COFCO Jiakang Food Co., Ltd., told reporters that the launch of pig futures is of great significance in response to the sharp fluctuation of pig prices. COFCO group has always attached great importance to the launch and operation of pig futures. Since the launch of pig futures this year, COFCO jiajiakang has actively participated according to its own breeding situation and avoided operational risks by selling hedging, which is the direct beneficiary of participating in pig futures.
Qin Jun, Secretary of the board of directors, also said that as an important Shenzhen Agricultural Products Group Co.Ltd(000061) related to the national economy and the people’s livelihood, China’s pig industry has long lacked a price discovery mechanism to guide market development. The launch of pig futures this year not only provides a good tool, but also provides a new channel for the whole industry, including producers and traders, to manage risks.
“Specifically, Chinese pig breeding enterprises have always faced the challenge of sharp fluctuations in market prices. In this case, the introduction of pig futures helps to promote the transformation of pricing mode in the whole industry. Enterprises can lock the listing price in advance through futures hedging, warehouse receipt sales, or trading of non-standard products extended from on-site products.
”Qin Jun said that in the future Muyuan Foods Co.Ltd(002714) will continue to deepen the understanding of futures varieties and the whole market, gradually increase participation, and make more contributions to the sound development of the whole pig industry.
The reporter learned that, like COFCO Jiakang and Muyuan Foods Co.Ltd(002714) , there are not a few large listed companies that actively use pig futures this year. For small and medium-sized farmers who account for a large number in China, the pig “insurance + futures” model has also entered their daily management. For example, Huaxi futures and Ping An Property Insurance used pig futures to carry out the pig “insurance + futures” project in Butuo County, Liangshan Prefecture, which provided protection for 36 local pig farmers and 2880 pigs. The compensation was about 1155000 yuan, and the compensation rate was about 334%. The local farmers excitedly told reporters, “I didn\’t expect to pay so much! Otherwise, they would lose their pigs this year.”
In Jiang Guojin’s view, this year is a solid start year for pig futures. I believe that with more and more enterprises participating in hedging, there will be great room for growth in the overall scale and function of pig futures market.
Market participants pointed out that there is a gradual process for any new variety to mature and function. Pig futures have achieved gratifying results in the past year, but it still needs a long time of deep cultivation and careful cultivation, and needs the support and understanding of all social parties. It is hoped that all sectors of society will actively cooperate to take care of this new tool and promote its healthy development.
(source: Xinhua Finance and Economics)
