February 14, 2022


China's soymeal prices soar to record high prices, swine industry affected



China's soymeal prices on the Dalian Commodity Exchange rallied to its highest price on record after concerns rose over South America's drought-hit soybean crop and tightening meal supplies in local markets, Reuters reported.


The increased prices for soymeal will affect production costs for swine farmers in China already affected by huge losses, and some may leave the market altogether, according to traders and analysts.


The Dalian Commodity Exchange's most actively traded soymeal futures soared to CNY 3,792 (~US$592.22; CNY 1 = US$0.16) per tonne, the highest on record, and 13% up compared to week before the Chinese New Year holidays.


Analysts and traders said concerns over smaller South American crops could tighten worldwide soybean supplies was key to the record high prices, but it could be also due to limited supplies in the domestic soymeal market.


Darin Friedrichs, co-founder of agricultural research firm Sitonia Consulting, said China's soybean imports in the second half of 2021 were low, and soybean improters are delaying as they wait for margins to rise.


Friedrichs said there are production problems as US futures have increased too, and Dalian soymeal is playing catch-up.


Importers from China have been expecting to buy affordable and large quantities of soybean from Brazil by February to meet their needs for the first quarter of this year, but crop issues in the South American continent have caught some importers off guard.


High soybean prices internationally plus weak local soymeal prices since mid-2021 have pressured China's soybean crushing margins, and many soybean crushers faced heavy losses late in 2021.


While margins recovered to positive territory in 2022, it remains below the long-term average, inhibiting soybean crushers' purchases for soybean.


Li Ming, analyst with the agriculture section of Mysteel, a China-based commodity consultancy, if soymeal prices remain high, it will result in increased farming costs and push farmers (large and small-scale) to cut production capacity.


According to official data, China's sow herd was 43.29 million head by the end of December last year, 2.9% lower compared to the previous quarter.


-      Reuters

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