November 13, 2013

 

Dalian Commodity Exchange launches egg futures contracts

 

 

In a move that will help iron out volatile egg price to benefit both producers and consumers, the Dalian Commodity Exchange began trading the nation's first egg futures on Friday (Nov 8).

 

Lot size is set at five tonnes, with a minimum price movement of RMB1 (US$0.164) per 500 kilogrammes. Contracts are available every month, and physical delivery is required. Trading margin is 8% of contract value, while daily price movement is limited to 4%.

 

"Egg futures will help mitigate price risks for the breeding industry and will have a significant impact on promoting the healthy development of the industry," said Liu Xingqing, head of the Dalian Commodity Exchange.

 

Li Qingyi, executive vice-general manager of Hubei Shendan Healthy Food Co Ltd, said his company will benefit greatly from the new futures contract. Shendan is the nation's biggest egg producer with 100,000 tonnes of annual capacity. It supplies more than 10,000 markets nationwide.

 

He added that the new futures contracts also will help set industry standards, such as colour, size and weight, which, in turn, will help industry development.

 

Egg prices went through a volatile patch last year and rendered losses for many producers. Starting May 2012, egg prices soared in many major cities. In some places, the price of an egg went up RMB0.1 (US$0.02) a day and didn't go down until October. Under normal conditions, egg prices are hiked only at major holidays as consumption increases.

 

According to the Dalian Commodity Exchange, China has 1.5 billion laying hens in stock. The industry has an annual capacity of 30 million tonnes and employs more than 10 million people.

 

The industry's total value exceeds RMB350 billion (US$57.5 billion). Yu Yuan, a manager of the agriculture commodity department at the Dalian Commodity Exchange, said the egg futures are the first in a line of livestock futures the exchange plans to introduce.

 

Yuan said the exchange has organised more than 20 promotion campaigns for egg futures this year, and the responses have been positive. He added that there is a learning curve for egg producers, especially smaller ones but that the idea of risk management can be promoted over time.