By Wang Lan (China Daily)
Updated: 2007-08-14 09:22

Dalian Commodity Exchange (DCE) yesterday said it is speeding up preparations for the debut of hog futures.

A sharp increase in pork prices has been driving the inflation rate over target levels causing widespread public concern.

It will be the first livestock futures contract to be introduced in the Chinese commodity market.

DCE has finished the preliminary draft of the contract on hog futures and will submit it to the China Securities Regulatory Commission (CSRC) for approval in the next couple of months, according to Wang Weiyun, the exchange's director of research department.

Analysts said the introduction of hog futures would benefit the whole hog industry chain, from breeders and food processors to traders.

"The introduction of hog futures would help stabilize the wide swings in pork prices and push forward the process of restructuring the hog industry in China," said Li Hanhong, an expert at DCE's research and development department.

Livestock husbandry has always been exposed to numerous unpredictable factors, including weather conditions and diseases, which in turn result in fluctuating pork prices.

According to figures compiled by the State Commercial Department, in 2006 top five hog producing provinces Hunan, Hubei, Sichuan, Henan and Shandong experienced wide fluctuations in pork prices, which dropped an average of 24 percent from January to May and rose 65 percent from June to October.

Pork prices have become the major contributor to the rising consumer price index (CPI) this year. National Development and Reform Commission statistics in June showed pork prices in 36 major cities of China surged an aggregate 12.3 percent from the year before.

Li said the hog futures market would help breeders to measure the supply and demand situation of the industry and smooth price swings.

China is a major hog breeding country. Pork is also the most largely consumed meat here. In 2006, hogs in China reached 600 million heads, up 3 percent from the year before, and the aggregate output of pork increased 3.7 percent to 51.97 million tons.

Li Jingyuan, an analyst at Hai Fu Futures Co, said the launch of hog futures would be conducive to the establishment of a transparent and unified pricing system of pork in China, which may help breeders to plan accordingly.