South Korea: lean hog futures trade kicks off
South Korea has today begun the trading of lean hog futures, the country's first agricultural commodity derivatives, South Korean news agency Yonhap reports.
The futures trade has been set up to assist pork farms and investors better anticipate price volatility and hedge risks.
The country's bourse operator, the Korea Exchange (KRX), said the derivative product will be traded from 10.15 am to 3.15 pm, based on the average nationwide prices of pigs in 11 markets.
The annual production of hogs in South Korea is worth 3.6 trillion won (US$3.55 billion) and their price volatility was 27.2% in 2007, compared with the 23.1% of the country's key stock index, according to KRX data.
"The listing of the hog futures, prepared for the last three years, comes as the pork market is the second largest in the local agricultural market after rice and there has been a growing demand to hedge risk stemming from high price volatility," the KRX said.
The KRX thinks that the pig futures will help hog farmers secure a stable income source as the product will enable them to control price fluctuations. It also said the hog futures will pave the way for the launching of other commodity derivatives.
Lean hog futures are also listed in Germany and the USA. Hog-related futures products have been traded on the Chicago Mercantile Exchange since 1961 with an average 29,000 contracts trading daily.
The KRX also plans to list petroleum product futures on the bourse next year.
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