China's Apple Farmers Benefit From Futures Contracts

Chinese farmers are now able to optimize their agricultural production and sales thanks to "apple futures," which have started to bring about change in the way they manage their land.

ZHENGZHOU, (APP - UrduPoint / Pakistan Point News - 10th Nov, 2018 ) :Chinese farmers are now able to optimize their agricultural production and sales thanks to "apple futures," which have started to bring about change in the way they manage their land.

With the ability to reflect product prices in the upcoming season, apple futures have earned the affection of local fruit farmers in the city of Sanmenxia, central China's Henan Province.

"With the futures prices in sight, there's no more haggling between outside buyers and local farmers," said Han Tonglei, chairperson of a local fruit cooperative. "Any price-related issues shall be referred to the futures prices." The launch of apple futures on the Zhengzhou Commodity Exchange earlier this year, hailed as the first for fresh fruit, has allowed apple farmers in the province to learn the market price of their products two months in advance and optimize their resources at hand.

About 6,000 farmers from Sanmenxia have affiliated themselves with companies that specialize in apple production and trade, and began to grow apples according to futures contracts, which have become pioneers in promoting standardization in apple production.

Wang Shaofeng, 48, a local fruit farmer, is now growing apples in his orchard under the guidance of a local fruit production company named Erxianpo.

Erxianpo has been in partnership with local farmers to grow apples with futures contracts on a standardized platform. The company is also a delivery warehouse for apple futures designated by the Zhengzhou Commodity Exchange.

This year, Erxianpo started to work with 100 villages in the city to develop 2,000 hectares of standardized orchards in an attempt to open more sales channels on the futures market.

"Apple futures provide the company with an important sales outlet and set a standard for high-end variety," said Zhao Yuewen, the company's general manager. "We are currently working on adjusting product sweetness, hardness and color to comply with the standard of futures contracts." In the past several years, it has been a challenge for local farmers to reap what they sowed, as some buyers only put a down payment on the apples they bought but did not pay the rest once their sales hit a slump.

Now, with the apple futures in place, both apple production companies and farmers are equipped with a tool to hedge against the risks.

"Erxianpo has taught us how to grow those high-standard 'future apples' and acquired them by paying us above the market price," said Wang Shaofeng. "It seems that the futures market has really turned apples into a stable source of income for us farmers."