China will begin trading its hotly anticipated hog futures this week as the industry looks for a safeguard against wild swings triggered by one of the world’s worst animal disease outbreaks, reported Bloomberg.
The contract will debut on the Dalian Commodity Exchange Friday after about two decades in the planning. The goal is to provide a key hedging tool for hog breeders recovering and expanding production after a deadly African swine fever outbreak destroyed local herds and drove prices to a record high.
“The trading volume of the live hog futures is expected to be massive, given the relevance of the product to the broader economy,” said Li Moyu, a Shanghai-based analyst at Orient Futures, a brokerage. Trading will be dominated by the country’s leading producers at the beginning, she said.
Pork prices are a crucial determinant of Chinese consumer inflation, with the two moving almost in lockstep. Last November, the nation posted its first deflation in consumer prices in more than a decade as hog prices fell following a rapid recovery in pig numbers. The following month, wholesale pork prices rebounded as demand strengthened ahead of a major holiday season, reported Bloomberg.