Pig diseases undermine China soy crushing margins

 

 

The crushing margins of China's soy plants fell to breakeven or negative for the first time in months amid large imports and low feed demand after frequent outbreaks of pig disease this month.

 

The slump in crushing margins has slowed purchases of near-month soy cargoes from South America, though cargoes for forward months until September and later still give good returns to buyers to sell their soyoil and soymeal on the local Dalian futures market.

 

A soy trader with a major trading house said there are fewer buyers for May and June shipments, as many are looking at the later months which are still profitable to hedge at Dalian.

 

Fears over Beijing's credit tightening have driven down Dalian's most-traded September soymeal contract by 3% over the past week and soyoil by 4%. CBOT soy prices also fell to 3-½ month lows amid expectations of record harvest in South America.

 

Chinese crushers have covered more than half of their soy needs from Brazil and Argentina from May to September. Chinese crushers need 3.5 million to four million tonnes per month.

 

Frequent outbreaks of pig diseases in January have worsened already seasonally low demand for feed, feed officials said.

 

Crushing margins have decline, some are breaking even and some could turn negative, said an analyst.

 

Pig diseases were frequently reported in China's northern provinces, including Hebei, Shandong and Henan, which have prompted many farms to slaughter larger numbers of pigs.

 

Cold weather may have sickened more pigs this year and frequent outbreaks of disease have also discouraged farmers from restocking immediately, said analysts.

 

China's soy imports in January and February are expected to stay high at more than four million tonnes each month. February's import volume was previously expected to fall due to the Lunar New Year holiday which starts on February 14, but traders said some January arrivals would be delayed into February because of US loading problems caused by bad weather.

 

Some US cargoes could be cancelled, but the amount is unlikely to be big. Some people holding too many cargoes may not be able to cancel them, said an executive with a soy crusher.

 

The executive added that trading houses with more flexible shipping arrangements would find it easier to cancel cargoes than buyers who had already paid for freight.