On January 13, the signing ceremony for the Fujian Nanping pig feed “insurance+futures” project was successfully held. As the first “insurance+futures” project in Fujian Province, Jinrui Futures Co., Ltd. will once again use the futures company's risk hedging expertise and join forces with Pacific Industrial Insurance Fujian Branch and Weicheng Insurance Broker Fujian Branch to provide pig feed cost and price guarantees for the beneficiaries of the project.
The signing ceremony was also attended by relevant leaders and representatives from the Nanping Local Financial Administration Bureau, the Nanping Banking Insurance Regulatory Bureau, the Yanping District Government, the Yanping District Bureau of Agriculture and Rural Affairs, and the Yanping District Finance Bureau.
According to the relevant person in charge of Jinrui Futures, the project was traded on January 12. Jinrui Futures is responsible for the risk hedging process through its subsidiary Jinrui Qianhai Capital Management (Shenzhen) Company. The project once again used the “insurance+futures” model, using Asian-style bullish options to spread the risk of feed cost price fluctuations for pig farmers to the futures market, and covered rising futures prices of corn and soybean meal as insurance liability. During the insurance period, when the average futures price is higher than the price of corn and soybean meal as agreed in the insurance, compensation will be made according to the price difference. This not only mitigates the financial risks caused by rising and fluctuating pig feed prices, but also opens up a new path for the healthy development of the local pig breeding industry in Nanping.
As to why pig futures, which have just been listed, were not directly used as a tool to avoid risk, the project leader of Jinrui Futures pointed out that on January 8, pig futures were officially launched in large commercial stores, and the customer originally hoped to use pig price insurance to protect the risk of falling pig prices this time. However, we discovered that currently coincides with the peak pork consumption season at the end of the year and the beginning of the year. Under the impetus of consumption, the spot price of pork across the country has risen continuously, while futures prices have fallen to 25-26/kg. Futures prices continue to fall sharply in anticipation of higher inventory and increased supply. Currently, the price difference during the pig season has reached more than 10 yuan per kilogram. In order to guarantee the effectiveness of insurance tools to hedge risks, wait and see, wait for the futures price to match the trend of spot prices, and then enter the market to apply for insurance.
In the past two years, the pig farming industry has been deeply affected by factors such as African swine fever and declining pig production capacity. Prices have remained high, and pig farmers are highly motivated to recover. However, due to factors such as rising commodity prices (piglets and feed), lack of effective financial support and risk hedging tools, pig farmers and breeding companies still face greater breeding risks.
In order to resolve this conflict, Jinrui Futures has successively launched price insurance projects targeting farmed feed in Dingnan, Jiangxi, and Dongxiang, Gansu, all of which have achieved good claim results. I believe that the pig feed “insurance+futures” project launched in Nanping this time can continue to help pig farmers lock in the cost of pig feed raw materials, effectively avoid feed price fluctuations, innovate a new model and path of “insurance+futures” poverty alleviation and agricultural aid, and establish a new benchmark for “insurance+futures” to protect the pig breeding industry.