Date
17 December 2018
China is the world's No.1 producer as well as consumer of apples. Fears of a supply shortage this year has led to commodity futures on fruit draw huge speculative interest. Photo: China Daily
China is the world's No.1 producer as well as consumer of apples. Fears of a supply shortage this year has led to commodity futures on fruit draw huge speculative interest. Photo: China Daily

China speculators’ new target: Apple commodity futures

China’s Zhengzhou Commodity Exchange launched the nation’s first apple futures in December last year.

Normally, the daily turnover volume is just a few billion yuan, but since May, the volume spiked to over 100 billion yuan. On May 16, it hit a record 616 billion yuan, which was more than the turnover of the Shanghai and Shenzhen stock exchanges.

Meanwhile, the futures price of apple also zoomed up to nearly 10,000 yuan per metric ton, compared with 7,800 yuan at the end of last year. Spot price of apple is about 8,000 per metric ton.

The sudden speculative interest in apple can be attributed to two factors.

First is the weather. Drought has hit certain parts of China earlier, which has stoked expectation of a steep supply shortage of apples later this year.

Second, since Beijing has cracked down on housing and cryptocurrency trading, punters are eager to find an alternative target to speculate on.

The fruit was introduced to China in 13th century. Now, China is the world’s largest apple producer, with annual output of 43.5 million metric tons last year, representing 60 percent of global production.

Meanwhile, China is also the world’s largest apple consumer, with domestic consumption of the fruit reaching 42.95 million metric tons last year. Basically, over 95 percent of China’s apple output is for domestic consumption.

Apples are largely grown by small farms, and many of them are located in poor counties.

To protect the livelihood of apple farmers, futures contract has been introduced to give them a hedging instrument.

Nonetheless, anything can be turned into a gambling tool in China, as Chinese simply love to speculate.

The exchange has increased the margin requirement to 10 percent from 7 percent since Wednesday, along with other measures to stem speculative activities.

Futures price and trading volume have both pulled back somewhat. But the daily turnover is still well above average.

This article appeared in the Hong Kong Economic Journal on May 18

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal columnist

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