Hog futures will be listed on the Dalian Commodity Exchange. Many rural farmers may not be familiar with it, and some may even think it has nothing to do with them. Others think this is a national measure to stabilize prices, and farmers' profits from breeding will be more guaranteed. In fact, these understandings are very one-sided. So, what impact will the listing of pig futures have on meat prices and rural farmers? Below, we will analyze it in detail.
One: We must deeply understand the huge role of futures
Hog futures, as a derivative of the spot market, have three main functions. For rural farmers, they should not have a one-sided understanding Each of these functions.
Price Discovery
Discovering value is the basic function of futures, especially when the price deviates greatly from value, it is conducive to rapid value return. For example, the price of pork today is as high as 30 yuan/jin, but there is actually a strong demand for its value to return.
Futures are an investment product
When it comes to the investment function of futures, there are actually many profound opinions in it. In layman's terms, it is what many people understand by buying low, selling high, and earning the difference. Of course, this kind of investment has threshold restrictions, which are not only reflected in the amount of funds, but also require professional knowledge as a foundation and professional profit methods as a guarantee, otherwise it will be difficult to survive.
Conducive to the return of the value of pork
The rise in pork has lasted for two years, from 6 yuan/jin in early 2019 to 30 yuan/jin today. The time and magnitude are huge. The ecological destruction of the pig industry is the main reason for the high price of pork. Now with the gradual recovery of the industry, the output has returned to 80%, but the price of pork is still high. I don’t know why everyone has thought carefully about it. No?
After this round of reshuffling of the pig industry, the structure of farmers has undergone significant changes. In the past, it was mainly individual households in rural areas, but now it is mainly large-scale breeding farms and even listed companies. Mainly, they have huge quantities and have increasingly stronger pricing power in the market.
It has become the norm recently for meat prices to rise sharply and then fall slowly or not at all. The reason is that these huge companies lack hedging tools and have poor ability to resist risks. In fact, this is understandable. Once the enterprises that have been supported with great difficulty go bankrupt due to the rapid drop in meat prices, the industry will fall into a swamp again. After the listing of pig futures, large enterprises can hedge and maintain value, and pork prices will be more confident, making it easier to return early.
The pig breeding industry has entered a period of differentiation between strengths and weaknesses
Driven by capital, the breeding efficiency of large-scale breeding companies will become increasingly stable. The reason is that not only do they have large-scale and advanced The management model and epidemic prevention experience will make it more resistant to market price shocks. The operation of small enterprises and individual farmers will be more difficult. Not only are the costs high, but they will also be relatively passive when prices fluctuate, and they may even suffer bankruptcy during severe price fluctuations.
As a derivative of spot, futures will play an increasingly important role. However, the operation of the pig industry will still follow the inherent laws of the market and is still determined by the basic supply and demand of the market. Whether it is the price of meat or the efficiency of breeding, it will only add an additional driving force. This will be the year when meat prices begin to return, and there will be more ups and downs due to the listing of pig futures. Let us wait for the healthy development of the market. I believe there will be big changes.