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Egg Futures Emerge as a Speculative Trade in China

09/23/2020

China has an active futures market with major exchanges continually issuing new contracts to appeal to individual investors.  Shell egg futures are popular among commodities with approximately three million metric tons (140 million cases) traded every day in China.  The egg market soared during summer with a 65 percent increase in trades from May through July but followed by an inevitable decline in volume. 

 

Individual investors can enter the futures market through a qualified broker with a deposit of less than $600.  Lot sizes in China are relatively small compared to the U.S. and the EU.  Part of the motivation for speculative trading is that many independent investors have available capital that is essentially trapped in China due to currency restrictions. 

 

It would be interesting if the CME were to introduce an egg futures market.  Providing that lot sizes are established to encourage individual investors, the futures market would serve as an alternative to the current privately operated commercial industry benchmark that has come under criticism.  This could potentially benefit producers and provide a more equitable measure of value to negotiate prices and to establish programs for flock placement egg categories and forward planning.