Dalian exchange ready to hatch egg futures

The Dalian Commodity Exchange is preparing to introduce futures contracts for eggs this year and for more farm products in the near future, said the senior executive of the exchange.

Liu Xingqiang, president and chief executive officer of the Dalian Commodity Exchange, said it is working to list egg futures, a change that is expected to receive regulatory approval this year.

"There is no confirmed timetable," Liu said. "But I expect egg futures will be listed this year if everything goes well."

The Dalian Commodity Exchange, in Liaoning province, is one of the three commodity exchanges that operate in China. The exchange is eager to expand its portfolio of agriculture-related futures contracts to help Chinese farmers avoid the risk of price fluctuations.

"The price of futures can be used as an indicator for farmers so they can control their farming activities accordingly," Liu said. "When the price of futures (for a certain product) drops, farmers can grow less and vice versa."

The Dalian Commodity Exchange offers nine kinds of futures contracts, six of which are related to agricultural products such as corn and soybeans.

Liu said eggs are closely linked to corn and bean pulp, both of which are used as chicken feeds.

"Given the size of China's population, egg consumption is not as big per capita as it is in Western countries. The market for egg futures is big."

Liu said the price of eggs is not only linked to chicken feeds but also plays an important role in people's daily lives.

Egg futures have been listed on Western exchanges for a very long time, but this is the first time they have been proposed for listing in China.

China has introduced futures contracts for only 13 agricultural commodities, whereas the United States has more than 1,000 such contracts. Liu said that indicates that a great opportunity exists to introduce more futures for the agricultural industry in China.

Despite the lack of the contracts, China's agricultural commodities market is the second-largest in the world. Last year, 573 million contracts were traded on it.

The Dalian exchange is hoping to see the listing of more agricultural commodities, such as live hogs and timbers, Liu said.

Introducing futures contracts for more farm products will help Chinese farmers and agricultural enterprises hedge the risk of price fluctuations and maintain their profits, he added.

China's three commodity exchanges in Dalian, Zhengzhou and Shanghai offer 26 futures contracts, for commodities ranging from base metals to agricultural products such as copper, aluminum, corn and soy beans.

According to the Futures Industry Association, 578 million contracts were traded on the Dalian Commodity Exchange in 2011, making it the 15th busiest in the world.