"Insurance + Futures" Has Become A "Reassurance" For Cotton Farmers.

According to the world clothing and shoe net, under the principle of serving the "three rural issues" and the development of the real economy, the exploration of futures market in the management of agricultural risk has been on the way.

The new model of "insurance + futures", which was promoted by exchanges, and pioneered by Futures Company and insurance companies, has entered the stage of expanding pilot projects and "full bloom" this year.

Cotton "insurance + futures" pilot expansion

As an important product of the "insurance + futures" experiment, based on the steady operation of cotton futures, Zheng merchants will expand the "insurance + futures" trial of cotton this year.

Insiders said that after the first breakthrough in Changjiang futures and Nanhua futures, Futures Company relay such as Galaxy futures and Huatai futures has made a useful exploration for the reform of the "insurance + futures" mechanism for poverty alleviation and the pformation of poverty alleviation.

In November 19th, in Weixian County, Hebei, dozens of large cotton farmers gathered in the government office of gazhuang Township, Weixian County, and witnessed the signing ceremony of the first cotton price index "insurance + futures" benefiting agriculture industry poverty alleviation project in Hebei province.

It is understood that the project is supported by Zheng Shang, Hebei Weixian County county government actively promoted by Huatai the Great Wall Capital Management Co., Ltd., Galaxy Galaxy Capital Management Co., Ltd., Kyushu Futures Limited and PICC jointly launched.

All parties worked together to steadily promote the landing and implementation of the project, and tried to use financial instruments to explore the way for cotton farmers to avoid risks.

It is understood that Weixian County is located in the southeastern part of Xingtai City, Hebei Province, with a total population of 600 thousand. It is Xingtai's population of second and third counties. Cotton is an important part of Weixian County's agricultural industry. It is known as "cotton in the south of Hebei Province". Its annual cotton planting area is more than 800 thousand mu. Cotton planting area and output have always been ranked first in North China, and it is one of the ten high quality cotton base counties in China.

Li Chong Road, general manager of group customer sales department of Beijing branch of PICC, told the China Securities Journal that the main body of the cotton futures price insurance service is 3024 cotton farmers, who insured 20 thousand mu of cotton and provided 46 million 260 thousand yuan risk guarantee amount.

Li Chong Road said that the current agricultural insurance in China is mainly to compensate for the crop reduction caused by natural disasters, which only provides risk protection for production risks, while there is basically no guarantee for another important risk in agricultural production and management, market risk (price risk).

In recent years, market risk has more and more influence on agricultural production, and the fluctuation of agricultural product market price affects the income level of agricultural producers.

In addition, in 2016 and 2017, the Central Document No. 1 put forward a pilot plan to steadily expand the "insurance + futures" experiment, and use insurance and futures cooperation to provide price risk protection for cotton growers.

"

As a big county for cotton production,

Planting area accounts for more than 10% of Hebei's planting area.

The cotton industry is a characteristic pillar industry of Weixian County's agricultural economic development.

In order to ensure the production benefits of local cotton farmers, we choose to carry out cotton price insurance business in Weixian County.

Li Chong Road said.

Since 2014, China's cotton market has abolished the purchase and storage system, instead of implementing the cotton target price subsidy in Xinjiang and implementing the quota subsidy policy in the mainland.

Insiders said that this policy change to a certain extent increased the ability of cotton farmers to resist risks, but since then, cotton prices have dropped sharply, which has made cotton growers' enthusiasm to be hit, and the cotton planting area in the mainland has been greatly reduced.

In 2015, under the promotion of the exchange, Futures Company and insurance companies pioneered the "insurance + futures" mode to innovate in serving the "three rural issues".

Up to now, the model has been written into central one document for two consecutive years.

According to the deployment of Central Document No. 1, in 2016, China launched the pilot project of "insurance + futures", covering 13 provinces, including cotton, sugar, soybeans and corn.

Cotton farmers only need to figure out their own accounts when they touch the period.

"As we all know, agricultural production is a big risk, so the demand for agricultural insurance is very large. Traditional agricultural insurance only guarantees production, and the insurance amount is relatively low. The premium is mostly subsidized by the state. How to resist the risk of market price has become the most painful thing for farmers."

Gao Zhenfang, chief of the Weixian County County of Xingtai, Hebei, told the China Securities Journal reporter.

Gao Zhenfang said that in 2017, Weixian County has made a beneficial attempt in the insurance price insurance of "insurance + futures". Weixian County Gao Gong Zhuang Township and Zao Yuan Township participated in the first single cotton futures price insurance project in Hebei Province, and the effect was better.

Through such innovative financial services mode, Weixian County will urge and guide new agricultural business entities, including cooperatives, family farms and large grower households, to learn to use futures market to raise market risk in agricultural products and to increase risk tolerance when prices fluctuate substantially, so as to avoid the risk of falling prices of agricultural products and protect the interests of farmers.

Gao Zhenfang took an active part in the mobilization of cotton insurance + futures in the presence of large cotton farmers.

He said: "insurance + futures" operation is a matter of professional financial institutions. Farmers do not need to understand how companies make profits. They only need to figure out the profits and losses that they may get in this business, so long as they are cost-effective, they can do so.

For many local cotton farmers, futures are still a strange tool.

Insiders said that the operation of "insurance + futures" involves insurance companies buying premium options with Futures Company premiums and hedging operations in futures markets by the Futures Company. For farmers, it is difficult to understand. Farmers only need to know that they can get compensation from the insurance company if they buy a price insurance from an insurance company.

In mid September, the Chinese people signed the OTC option agreement with the Galactic capital. In late September, the Chinese insured issued a insurance policy in the next ten days of September, that is, the insurance number was 6667 Mu and 150 kg per unit insurance output was covered by the 1801 contract of Zheng Shang cotton futures. The insurance period was 1 million 542 thousand and 70 -12 months September 22, 2017, and the insurance amount was 1 million 542 thousand and 70 yuan, and 836 households were insured.

"The market price is set as the closing price of cotton futures 1801 contract during the insurance period.

According to the terms and conditions of the insurance policy, when the price of cotton futures contracts reaches the agreed price during the insurance period, it is regarded as an insurance accident. The insurance institutions are responsible for the compensation in accordance with the insurance contract. The Zhengzhou commodity exchange provides financial support to farmers to subsidize most of the insurance costs and reduce the burden on farmers. Farmers can only lock in cotton income in advance by paying only a small fee.

Galaxy futures related responsible person said.

"Assuming that the closing price of cotton futures 1801 contract is 15200 yuan / ton, the execution price is =0.9 * 15200=13680 yuan / ton, if the price falls down to touch 90% insurance period, the 1801 contract price falls to 13680 yuan / ton, then the claim amount is =15200-13680=1520 yuan / ton."

Galaxy futures related responsible person said that this will help to enhance the insurance experience, so that farmers get the fullest protection of interests, so that cotton farmers lock down the loss of prices, stimulate production enthusiasm, increase cotton planting investment.

It is also understood that under the support of Zheng Shang, the cotton price insurance subsidy project completed by Galaxy futures, Huatai futures, Kyushu futures and PICC has provided more than 98% premium subsidies to cotton growers in Weixian County.

Insiders said that this greatly reduced the burden of local farmers' premiums and the government's financial burden.

Constantly explore and improve the "insurance + futures" mode

"Insurance + futures" originated in 2014, formally put forward in 2015, and in 2016 and 2017 for two consecutive years into the first document.

Zhou Bo, deputy general manager of Huatai the Great Wall Capital Management Co., Ltd., said that since the "insurance + futures" business was launched, it has gone through four stages.

The first stage is the embryonic exploration period.

The second stage is the Futures Company leading stage.

The third stage is led by insurance companies.

The fourth stage is the market demand leading area, and the demand is divided into two levels. For example, in Weixian County, besides cotton, wheat, sugar, corn, pear and grape, these agricultural products can also make this model, which is the first level demand; the second level demand is the "Three Rural" service at the national level, that is, how to make farmers earn more money.

The China Securities Journal reporter learned from the interview that as an important innovation tool for serving the "three rural issues", the "insurance + futures" mode of promotion is mainly faced with the guidance and support of the government departments. The insurance institutions and agricultural operators mainly have the cognition and participation in the "insurance + futures" mode, the lack of insurance cost support funds, the lack of farmers' income protection, and the high cost of insurance products, which requires the government, enterprises, futures markets and insurance companies to solve together.

It is also understood that, based on the experience of pilot construction of "insurance + futures" in 2016 and the pilot construction in 2017, three suggestions for improvement were put forward on the basis of full exchange with all parties in the market.

First, reduce the pilot premium rate through various ways (Quan Lijin).

The two is to establish a pilot regular co-ordination mechanism and green approval channels.

The three is to enhance the flexibility of the "insurance + futures" pilot mode and explore the introduction of more flexible insurance products, such as income insurance, American options (insurance) and ladder options (insurance), so as to meet the needs of farmers.

Demand.

Insiders said that the "insurance + futures" mode as an innovative means to solve the risks of agriculture, rural areas and farmers is worth encouraging and promoting.

In the international market, the federal crop insurance system in the United States has gone through 80 years of exploration. Facing the problems arising from the early development of the "insurance + futures" mode, we call on the market to treat it rationally and solve it patiently.

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