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1. What is pig futures?
Pig futures is a new thing, at least for the pig industry in China, it is indeed the first time in history. But in fact, it is not achieved overnight. The pig industry is no stranger to commodity futures, and corn and soybean meal futures have always had a great influence on the feed industry. This time, the big commercial house responsible for pig futures has also been undertaking the trading of corn and soybean meal futures.
In the world, live pig futures also have a long history. As early as 1966, live pig futures began to be traded on the Chicago Mercantile Exchange (CME). Now, the lean pig contract ranks second among the most active agricultural products contracts on the Chicago Mercantile Exchange.
In China, as early as the end of 2008, the "Opinions on Promoting the Stable Development of Agriculture and Increasing Farmers' Income in 2009" issued by the Central Committee of China and the State Council mentioned the adoption of futures trading and other measures to stabilize the development of pig industry.
On February 20 18, the CSRC officially approved the application for the establishment of pig futures by Dashang, which indicates that the listing of pig futures will go further. Subsequently, the Dashang Institute began an industry research on how to carry out pig futures. It is worth noting that although the CSRC has now approved pig futures trading. However, the relevant specific rules have not yet been announced.
2. The significance of live pig futures to the industry
The caution of the big trading house is understandable. After all, live pig futures is the first futures product delivered in China. Coupled with the existence of non-epidemic risk, how to deliver and how to set the delivery standard need to be considered. After all, it is different from other futures. For pig futures, besides the demand of speculative trading, the original two functions of futures may be more concerned by the pig industry.
(1) Price discovery function of live pig futures. So that farmers can avoid the risk of sharp fluctuations in market prices. Simply put, futures trading is a future contract, and the price of pig futures reflects the expectations of all parties for the price of pigs at a certain moment in the future. Compared with farmers who are now puzzling over their own problems, it is obviously much more reliable to observe the overall price expectation of the market through futures contracts with different maturities.
(2) Hedging function. Pig processing and marketing enterprises can avoid risks by hedging, and pig futures can adjust all links from breeding, breeding, feeding, processing to sales according to changes in market demand. At present, the hedging of corn and soybean meal futures by large feed enterprises can be said to be very mature, which has become a great weapon for some feed enterprises to reduce feed costs. In the future, capable slaughtering enterprises and breeding enterprises will inevitably join this ranks.