January 26, 2021

 

Drop in soybean, corn futures attributed to South American weather, ASF in China

Soybean and corn futures have fell due to favorable South American weather and the resurgence of African swine fever in China, market sources told S&P Global Platts on January 25.

 

March soybean futures have dropped over $0.60 within hours to close at $13.0970/bu on January 22 on the Chicago Board of Trade and are currently trading at $13.0738/bu on January 25.

 

A similar price pattern was seen in the Asian corn market.

 

March corn futures fell under $5/bu during Asian trading hours on the electronic CME Group's Globex on January 25.

 

The downtrend in futures sustained and the March corn contract was seen shedding another $0.05/bu from its settlement of $5.50/bu on January 22.

 

Since mid-December, rains have benefited both soybean and corn crops in South America, leading to improved yield expectations and upward revisions in output projections for the new crop.

 

The average projection for Brazilian soybean in 2020-21 marketing year (February 2021 - January 2022) has been revised up 400,000 tonnes from December estimates to 132.2 million tonnes, analysts said.

 

A similar trend is brewing in Argentina, where the soy production expectations for 2020-21 have increased 500,000 tonnes from November forecast to 47 million tonnes.

 

In the coming days, rains in South America are not showing any signs of relenting. Rains will remain active across Mato Grosso, Mato Grosso do Sul, Parana, Santa Catarina and Rio Grande do Sul, which will continue to support corn and soy growth in these areas for the week ending January 30, weather agency Maxar said on January 22. In Argentina, rains have been sufficient in central and northern areas, thus supporting corn and soy growth, it added.

 

There are reports of African swine fever (ASF) resurging in a major pig farm in China, stoking demand concerns for soybean meal-based animal feed in the coming days.

 

According to market sources, new strains of ASF virus have been found at a pig farm in southern China and a sizable number of swine herd has been culled as a precautionary step.

 

A similar outbreak happened in October 2020 in the country and the Chinese government took prompt quarantine measures to combat the epidemic, analysts said.

 

China lost over 50% of its swine population to ASF, which emerged in August 2018. Following large-scale quarantine measures, over 200 million pigs were culled, leading to massive shortage of pork in the country.

 

Nevertheless, the country's pig farming sector has witnessed a rapid consolidation since late 2019 as small-scale farms were amalgamated into big entities under a government directive, a Beijing-based consultancy said earlier.

 

If the current swine growth trend - backed by a steady process of pork industry consolidation and biosecurity measures - continues, China's hog production capacity is likely to reach 100% of its pre-ASF level in June 2021, according to the Ministry of Agriculture's report on November 30.

 

However, the current ASF outbreak may dent the hog herd recovery projections, analysts said.

 

- S&P Global Platts