Trading in apple futures begins in China

Thu 28/12/2017 by Richard Wilkinson

Trading in apple futures began on the Zhengzhou Commodity Exchange on December 22nd, 2017. This is the first trading in fresh fruit futures in the world and could boost the pricing power of Chinese apples and establish it as a global apple pricing centre. This is a significant move as China is the world’s largest apple producer and the largest importer of apples. Total annual volumes are about 43 million tons. The Chinese apple harvest covers an extended calendar in China thanks to its different growing regions. Combined with the usage of cold storage, apples can be supplied continuously throughout the year and guarantee delivery. Most of China’s apple production is relatively small-scale resulting in price volatility. Since 2010, domestic apple prices have fluctuated by a minimum of 7% a year. In 2015, volatility peaked when it reached 150%.

Apple futures may have a significant impact on apple growers and the entire industry. Through hedging, apple growers can look to insurance companies, new agricultural companies, and futures companies instead of directly hedging with futures contracts. Futures companies provide apple dealers with services such as price insurance. Dealers too can ensure a minimum purchase price for apples and futures companies can use apple futures as a hedge to remove risk from fluctuations in the price of apples. In terms of investment, apple futures can allow farmers to make risk-free returns as sellers of futures contracts. Even when their judgment is slightly wrong, farmers can still hedge the risk and can get some return on investment. Also, futures markets can help price expectation. This can assist farmers in organising production, optimising operations and predicting future earnings.

According to trading rules, apple futures are currently trading at 10 tons per lot. Delivery will take place in January, March, May, July, November, October and December in the main apple production areas in the provinces of Shaanxi, Shandong, Henan, Shanxi, Hebei, and Gansu.


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