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On November 4, Dalian Commodity Exchange (DCE) announced the contracts and rules for the egg futures, with the countermeasures for the epidemic risks designed according to the features of eggs as one of the highlights. How should the egg futures, China’s first livestock futures product with the fresh and live features, respond to the epidemic risks? In this regard, an official of the agricultural products business division of DCE said that as the egg futures are China’s first livestock futures product with the fresh and live features, DCE has always paid attention to the potential influence of the features of the product in the course of research and development, starting with all the details of the contract rules to strictly prevent and control all kinds of trading risks, especially the risks caused by the outbreak of the epidemic diseases related to laying hens.
Before researching and developing the egg futures, DCE fully estimated the trading and delivery risks caused by the outbreak of the related epidemics. According to the official, currently there are 10-plus common epidemic diseases related to laying hens with the avian flu reporting a wider range of dissemination and a larger impact. The year of 2004 saw the epidemic situation of the avian flu with the largest affected areas in the history in China. But in recent years, as the Chinese government has continuously attached importance to the avian flu epidemic, introduced tens of laws, regulations and departmental rules such as the “Animal Epidemic Prevention Law”, built a relatively complete system at the national level for prevention and control management and technological support of the animal epidemic diseases, intensified the preparations for emergencies, and stepped up the efforts in all aspects such as immunization, monitoring, disinfection, harmless treatment and quarantine supervision, the spread of the avian flu has seen significant decline in intensity, with the outbreak frequencies largely decreased, the affected areas remarkably shrunk and the epidemic cases reduced year by year, having smaller and smaller impact on egg supplies in China.
The official also said that among all the animal products, the egg is the product with the smallest risks of food safety and the best quality safety, which is also the main reason for DCE to choose the egg as the breakthrough for the livestock futures products. It is the laying hens that are affected by the avian flu epidemic, but the infected laying hens do not lay eggs or lay deformed eggs, so the eggs are hardly affected by the avian flu in fact. The impact of the avian flu on the egg mainly exists in the aspects of market prices and the consumer psychology.
DCE has taken the most stringent standards into account when researching and developing the egg futures, rigorously preventing the relevant risks caused by the epidemic diseases in all the aspects such as designing the contract rules and formulating the trading systems. According to the official, in response to the possible impact of the epidemic outbreak on the delivery, in accordance with the “Animal Epidemic Prevention Law of the People's Republic of China”, special articles and special work items have been made to address the epidemic situations: first, delivery warehouses have been set up in the main production and sales areas in China so as to ensure sufficient warehouse capacity for delivery during the intensive outbreak of the epidemics; second, the measures such as suspending the warehouse receipt registration for the delivery warehouses in the infected areas and forcing the seller to change goods at the delivery warehouses in the non-infected areas will be taken so as to ensure the quality safety of the eggs during the epidemic outbreaks; third, according to the proportion of the delivery warehouses included in the infected area, the measures such as suspending or terminating the trading will be taken after being approved by the China Securities Regulatory Commission (CSRC) so as to reduce the impact of the epidemics on the market in extreme cases; fourth, close contacts with the Ministry of Agriculture and other relevant ministries and commissions will be maintained so as to timely gain access to the epidemic information and step up the monitoring of the market prices; fifth, the promotion and publicity of the knowledge of the avian flu will be strengthened so as to foster the correct investment philosophy, educate the investors to avoid irrational speculations and reduce the possible impact of the epidemics on the price of the egg futures.
With regard to the impact of the epidemic risks, Zhang Ruming, R & D manager of Liangyun Futures, said that even an epidemic with a certain size and scope can only affect the egg price and the upstream and downstream on the industry chain, but the measures in the existing contract rules for addressing the risks of emergencies such as epidemic diseases will ensure the safety of the overall market operation for China’s first fresh and live livestock futures product. From another perspective, if the outbreak of the avian flu adversely affects the operation of the upstream and downstream enterprises on the industry chain, the egg futures will help the enterprises hedge against the risks as a financial instrument.
