China's soymeal prices rally to record high
Soybean shipments from South America did not cover demandChina's soymeal prices rallied to a record high on Thursday even as the government plans to release soybeans from reserves amid worries over tight supplies in the market, reported Reuters.
China's soymeal futures prices on the Dalian Commodity Exchange rose 5% to hit 4,064 yuan ($643.13) per tonne, up 12% since the Lunar New Year holiday.
China said this week it would release some soybeans from state reserves to boost supplies but did not give details of volumes.
Soymeal cash prices in Rizhao in Shandong province, a main processing hub in eastern China, rallied to 4,400 yuan per tonne, up 250 yuan from last week, and the highest in almost nine years.
Soybean crushers did not build up much inventory before the Lunar New Year holiday because of poor margins and came back from the holiday to find bean arrivals from South America were insufficient to cover demand, said Zou Honglin, an analyst with the agriculture division of Mysteel, a China-based commodity consultancy.
National weekly soybean inventories by last Friday were at 3.017 million tonnes, down 14.36% from the previous week, and down 33.33% from the previous year.
Soybean meal inventories fell 47.43% from a year ago, to 385,300 tonnes, according to data from Mysteel.
Bean supplies were so tight that major crushing plants from the northern port of Tianjin to the southern province of Guangdong have set up plans to curb production in recent weeks, fuelling the rally in soymeal prices, according to analysts and traders.
Bunge's crushing plant in Tianjin shut down in mid-February and will stay closed to the end of March and its plant in Nanjing is planning to shut down this week until the middle of March for planned annual maintenance, a company spokesperson said.
Chinese crush margins turned negative at the end of 2021, curbing large bean purchases. Crushers still struggled to make profits as demand from the livestock sector stayed flat.
Bad weather in Brazil has led to lower estimates of the new crop size and delayed the harvest and loading in the world's top exporter.
China should have received 5 million tonnes of beans from Brazil in January but they only loaded about 2 million tonnes. So the rest was rolled over to February but ports are still having issues with capacity and there will be ongoing backlog, said a China-based trader.
"Many in the market were caught unprepared," said a second trader, based in northern China.
Soymeal in the region is trading at a premium of 600 yuan a tonne to soymeal futures, up from 200 yuan before the Lunar New Year, the trader said.
Soaring soymeal prices, the key protein in animal feed, would further cut margins for pig farmers who are already suffering losses.
"Soymeal supplies are tight," said another trader based in the eastern province of Shandong, and some crushers in the region are restricting sales, though some plants were still operating despite earlier plans to shut down.
To cope with the high prices, some feed producers in the region are replacing soymeal with alternative meals in the feed ration, the trader said.
While several shipments of Brazilian soybeans are currently en route to China, the persistently weak crushing margins have restrained further large purchases which could have helped alleviate the shortage.
"Right now there is no clear solution (to the tightness), and the market is keeping an eye out for the reserves release," said Zou.