China's first live delivery derivative - live hog futures - started trading Friday at the Dalian Commodity Exchange in Dalian, Northeast China's Liaoning province.
It will provide a hedging tool for participants in the entire industrial chain, together with corn, soybean meal and other futures and options, thus promoting the healthy development of animal husbandry from breeding to animal-feed producers, said Fang Xinghai, vice chairman of the China Securities Regulatory Commission.
"Breeders can capitalize on futures prices to arrange production plans and hedge against risks to stabilize price, guarantee supply, and shorten 'hog cycles'", Fang said.
China is the world's top hog producer and pork consumer, accounting for 43 percent of the world's total production with a market value of about 2 trillion yuan ($310 billion), said Ran Hua, president of DCE.
For a long time, hog breeders, traders, and processing enterprises have been plagued by "hog cycle, or a market where future investment needs to be made well in advance of usage. During a boom market, lots of hog farmers jump in and raise more piglets. But, when all these piglets come to market, the price collapses because of oversupply.
The African swine fever outbreak and COVID-19 pandemic in recent years have made live hog prices fluctuate wildly. The industry has a strong demand for hedging against risks, Ran said.
DCE started research on live hog futures in 2001. During the past two decades, China's pig industry has undergone great changes.
The successful launch of hog futures is of great significance to better guarantee the high-quality development of the live hog industry, better serve the modernization of the industrial chain and supply chain and accelerate the revitalization of Northeast China, said Jin Guowei, vice mayor of Dalian.
Three types of contracts debuted on DCE on Friday, and all slumped over 12 percent.