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22:33, 22-Dec-2017
Apple futures tied to China's poverty alleviation policy
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China has unveiled its marketplace in apple futures, described as the first of its kind in fresh fruit, at the Zhengzhou Commodity Exchange.
Officials said Friday's introduction of apple futures contracts is linked to China's targeted poverty alleviation policy to defend farmers against price volatility.
Of the 122 apple-producing counties in China, 33 are listed as impoverished and their income moves in sync with fluctuations in prices.
The apple futures contract can shield farmers against price risks, guarantee a stable income and keep pricing transparent and reliable.
“The futures contract will aid China's poverty alleviation efforts, especially in apple-producing areas," said Leng Bing, director of the Agriproducts Department at the Zhengzhou Commodity Exchange.
Experts believe that cooperation between financial firms, cooperatives and farmers can mitigate the risks of price volatility and ensure a stable income for farmers.
“It providers a buffer against price swings and locks the income for farmers,” said Professor John Gong of the University of International Business and Economics. “Change like this really contributes to an efficient allocation system, which helps farmers’ incomes as well.”
Apples have been trading at low levels since early 2013 largely because of expanding production. Market speculation has also been blamed.
But Professor Gong suggested that speculation actually contributes to price stabilization.
“Speculation is a necessary evil for futures exchange. It brings liquidity to the market. With speculative investments in apple futures, a big pricing gap can be narrowed. So I don’t think it is necessarily a bad thing,” he said.
Apple Futures is just one step forward to exploring new approaches for agriculture futures serving the real economy. More futures are expected in the future.