China's securities regulator has approved plans for a long-awaited live hog futures contract, taking the Dalian Commodity Exchange a step closer to launching a product that will allow farmers in the world's top pork market to hedge livestock costs.
The exchange said in a statement late on Monday that the China Securities Regulatory Commission had given the go-ahead for an application first logged last year.
Details about the contract and the timing for the launch have yet to be decided, said an official with the exchange.
The exchange has spent more than a decade researching the feasibility of hog futures, which will complete Dalian's hedging offering for the whole meat industry supply chain, including soybean, soymeal and corn futures. It submitted a formal application to operate a live hog contract early last year.
The hog futures approval also comes ahead of a much-anticipated crude oil futures contract, for which approval is expected soon.
The exchange will still need a final go-ahead from the State Council, China's cabinet, before commencing trading.
China consumes about 55 million tons of pork a year, half of the global total, but production is highly cyclical. Futures will help pig farmers hedge the risks of price swings in the highly volatile market, the exchange said in its statement.
However, skeptics say the contract may have limited appeal to farmers at first.
China's other major commodity derivatives are very popular with speculative and financial investors, whose trading strategies have whipsawed prices of everything from steel and eggs to rubber over the past two years.