Caixin
Dec 12, 2020 07:46 PM

Trading of Live Pig Futures to Start Next Month

In 2019, pork production in China reached 42.6 million tons and per capita consumption was 20.3 kilograms.
In 2019, pork production in China reached 42.6 million tons and per capita consumption was 20.3 kilograms.

Trading of live pig futures will soon begin in China, as regulators in the world’s biggest pork consumer try to help market players offset price fluctuations.

The futures will be listed for trading on the Dalian Commodity Exchange from Jan. 8 next year, according to a Friday statement (link in Chinese) issued by the China Securities Regulatory Commission.

This will be the first time an item listed on China’s futures market involves living animals being delivered. “(The market) has paid a great deal of attention to the launch of live pig futures,” a futures market participant told Caixin.

When pork companies begin trading, the live pig futures can provide an open, transparent and reasonable price reference point, which will help them arrange their production plans and allocate funds more efficiently, the source said.

The futures will also add to the agricultural market’s risk management toolbox, helping to offset the risk of price fluctuations, the source added. Other tools include futures and options for soybean meal, corn, and soybean oil.

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The world’s largest pork producer and consumer has seen pig prices fluctuate several times over the past decade, including skyrocketing prices last year due to a deadly nationwide African swine fever outbreak.

China’s pig market has experienced four cycles of price fluctuations since 2006, each lasting three to four years, said a report by Essence Securities Co. Ltd. earlier this month. Factors influencing fluctuations include the fact that the majority of pig producers are small farmers, seasonal and weather changes, and epidemics, the report said.

In 2019, pork prices in China rose continuously from March that year, more than doubling year-on-year in some months as the fever outbreak caused supply shortages. That virus was a key driver of consumer inflation over the past year.

Futures prices may rise and fall dramatically in the immediate aftermath of trading being launched due to the current condition of the live pig market, the futures market insider said, as the situation is complicated and price fluctuations are drastic amid the lingering fallout of African swine fever and the Covid-19 pandemic.

The Dalian Commodity Exchange, based in Northeast China’s Liaoning province, has released draft rules (link in Chinese) for the live pig futures and is seeking public feedback until Dec. 19.

In 2019, pork production in China reached 42.6 million tons and per capita consumption was 20.3 kilograms (44.7 pounds), according to data from the National Bureau of Statistics.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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