RECOGNISING THAT INVESTORS should not put all their eggs in one basket, a Chinese commodities exchange is offering a novel futures contract to hedge against risk.
The Dalian Commodity Exchange, China’s main market for agricultural product trading, began trading chicken egg futures yesterday.
Futures are an agreement to deliver or take delivery of a commodity or financial instrument at a set date and price.
“As China’s first livestock futures product and fresh agricultural product, the introduction of egg futures has profound meaning for the industry and development of the futures market,” the exchange said in a statement.
Farm goods
China, the world’s most populous country, is a major producer of farm goods to feed its more than 1.3 billion people.
The national retail price for eggs in China was around 3.82 yuan (€0.46) per half-kilogramme on Wednesday, according to an industry estimate.
The exchange, which also trades China’s benchmark corn and soybean futures, said the new product would benefit both farmers and companies. It will trade in five-tonne lots.
China is not the first to offer egg futures.
But the United States stopped trading them in 1982 and Japan in 2010, the Dalian exchange said on its website.
Analysts said one challenge would be to guarantee quality and freshness of the eggs for buyers who take delivery.
China has grappled with both a widespread outbreak of H7N9 bird flu earlier this year which hit poultry sales and repeated food safety scandals, including cases of “fake” eggs uncovered by consumers.
But that has not deterred Chinese investors, who face limited choices on where to put their money given the country’s strict controls over overseas investment.
“There’s plenty of interest,” Gao Yanbin, an analyst at Jinshi Futures, told AFP.
Farmers and feed companies hope this kind of product will give them corresponding protection from spot prices.
If the new futures contract is successful, it could lead to other types of “fresh” farm products such as live hogs, he added.
China has four futures exchanges including one trading financial instruments, which are competing to offer more products to cook up business.
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