One Year After Listing, Egg Futures Market Functions Gradually Emerge
At the recently held Second (2014) China Egg Industry Chain Supply and Demand Situation and Egg Futures First Anniversary Analysis Meeting, a relevant person in charge of the Agricultural Products Department of the Dalian Commodity Exchange said that since its listing on November 8, 2013, egg futures have shown a good development trend, with stable market operation and market functions brought into play. As the first fresh agricultural product futures, its delivery has attracted widespread attention. Since the listing of egg futures, 11 breeding enterprises, 5 traders and 1 spot subsidiary of a futures company have smoothly participated in delivery, and the effectiveness of the delivery system has been tested.
Since the listing of egg futures, positions and trading volume have grown steadily, the degree of participation by industrial clients has steadily increased, and market liquidity has been good. In 2014, the average daily trading volume of egg futures was 154,000 lots, and average daily open interest reached 125,000 lots. At present, institutional clients account for 11% of open interest and 13.5% of trading volume, while more small and medium-sized breeders participate in egg futures in their own names. From the perspective of price performance, the fluctuation range of egg futures prices was far smaller than that of spot prices during the same period. For example, the cumulative fluctuation range of the 1409 contract, which once became the market's main contract, was 27.6%, while the cumulative fluctuation range of Hebei spot prices during the same period was 51%; at the same time, the price spread between the egg futures and spot markets returned to normal, and the convergence of the futures-spot price spread after contract expiry increasingly improved. The futures-spot price spread at the expiry of the 1409 and 1410 contracts was within 100 yuan/500kg, and the futures-spot price spreads of all contracts showed a continuously narrowing state.
Under the guarantee of stable market operation, the functions of the egg futures market emerged. First, the correlation between egg futures and spot prices strengthened, and industry price transparency improved. Since 2014, the correlation coefficients of the egg futures 1405 contract and 1409 contract with spot prices were 0.9 and 0.84 respectively, and futures and spot trends converged, bringing a profound impact on the industry, promoting the formation of a new information chain among spot enterprises, futures companies and information suppliers, promoting the improvement of breeders' price sensitivity and ability to judge future spot price trends, and providing a basis for formulating breeding plans. Second, a hedging chain for the laying hen breeding industry initially took shape, helping promote the optimization and adjustment of the industrial structure. The development of egg futures together with corn and soybean meal futures helps develop large-scale and intensive breeding, promotes the optimization and adjustment of the industry structure, and at the same time increases the enthusiasm of large enterprises to participate in the poultry breeding industry. Third, egg futures began to serve the modernization of the laying hen industry, and through egg futures popularized relevant national standards and other elements of industrial modernization to small and medium-sized traders and farmers. For example, egg freshness previously lacked a quantitative standard, and the Dalian Commodity Exchange introduced an important indicator for measuring egg freshness - the Haugh unit, stipulating that the Haugh unit of eggs entering storage must be greater than 72 units. This indicator is very unfamiliar to many traditional breeders, and by learning and mastering the new standard, breeders improved their ability to participate in industrial modernization. At present, some domestic food enterprises have begun to purchase Haugh unit testing instruments to control the freshness of purchased eggs.
The Dalian Commodity Exchange will further take measures to develop and improve the egg futures market. First, further improve the egg futures contract rules according to spot market conditions, continue to improve delivery methods convenient for enterprise participation, adjust the validity period of warehouse receipts, and expand factory warehouse resources, etc. Second, do a good job in market risk prevention and control, continue to strengthen market supervision to prevent illegal trading, and at the same time track the positions of industrial clients, provide good delivery services, and ensure effective linkage between the futures and spot markets and stable operation of the futures market. Third, further strengthen market publicity and training, advance industrial services, continue to cultivate the market, and in industries related to listed varieties, including the egg industry, continue to advance the "Thousand Villages and Ten Thousand Households Project" and the "Thousand Enterprises and Ten Thousand Households" market service project, train and guide farmers and enterprises to make good use of the futures market, and promote the comprehensive transformation and development of laying hen breeding toward modern agriculture.