Eggs, corn starch, and pig options are listed for trading today

With the approval of the China Securities Regulatory Commission for registration, egg, corn starch, and pig options will be listed and traded on the Dalian Commodity Exchange at 9:00 am today (23rd). Options refer to the right to buy or sell a certain quantity of underlying assets at a specific price at a specific time in the future, which can better meet the hedging needs of enterprises for complex risks.

China is the world's largest producer and consumer of eggs and pigs, and the second largest producer and consumer of corn starch. After the three varieties of eggs, corn starch, and pig options are listed, there will be 45 commodity option varieties in China's futures market, further expanding the coverage and enriching the derivative tools that serve the real economy and agriculture, rural areas, and farmers.

Futures tools help pig and egg enterprises smoothly overcome loss periods

Since the beginning of this year, the price of eggs in China has first fallen and then risen, and the industry has experienced a six-month period of losses. Since 2023, the price of live pigs has also remained low, and it was not until this year that breeding companies ended their year long losses.

During the interview, the reporter learned that some industrial enterprises actively used futures tools to manage risks and smoothly passed the loss period. How do futures instruments work?

Mingyue is the head of a chicken farming enterprise in Sichuan. Since March this year, there has been a significant drop in egg prices, which has caused great operational pressure on her company.

Mingyue, General Manager of Leshan Mingshi Agricultural Development Co., Ltd.: At its peak, the price of eggs per kilogram reached five or six yuan in the Sichuan region. In the first half of this year, with just over three yuan, the entire cash flow has almost halved.

The loss period faced by the pig farming industry is longer than that of the egg laying chicken farming industry. Starting from December 2022, the price of live pigs continued to decline, from the highest of 22.45 yuan per kilogram to the lowest of 13.3 yuan per kilogram in December 2023.

Ye Bo, head of the Pig Futures and Derivatives Department of DeKang Group: Last year, our industry experienced a full year of losses, which led to the elimination of production capacity.

Faced with market fluctuations, both companies have chosen to use the futures market for risk management.

Mingyue, General Manager of Leshan Mingshi Agricultural Development Co., Ltd.: At the end of last year, when prices were high, she sold eggs ahead of schedule in the futures market to make up for the losses in cash trading.

Sichuan Dekang Animal Husbandry not only uses futures market hedging, but also plans its production pace by observing futures forward prices.

Ye Bo, head of the Pig Futures and Derivatives Department of DeKang Group: Nowadays, pig farming should be a time of relatively high profits. Our forward contracts for pig futures provide a level lower than the current spot price, which also reminds breeding companies to sell their pigs in a timely manner.

Recently, both egg prices and pig prices have rebounded, and breeding enterprises that have used futures tools to withstand the loss period have achieved steady development. The listing of egg options and pig options will provide enterprises with richer and more refined risk management solutions.