May 28, 2022
China's COVID-19 restrictions slash soyoil demand, soybean imports down
Traders and analysts said COVID-19 lockdowns to prevent the spread of the virus has cut demand for soyoil, which will also result in declining soybean imports and short supply of soymeal, Reuters reported.
Because of the lockdowns and high soybean prices, demand for all edible oils in the 2021/22 marketing year, which began last September, is expected to drop 8.45% from a year ago to 39.02 million tonnes. This is the first decline this century, according to the National Grain & Oils Information Centre, a government think tank.
Mysteel, a China-based commodity consultant, said soyoil consumption declined 11% in March and 15% in April compared to the same time in 2019, before the COVID-19 outbreak. In 2022, total soyoil consumption will be 16.74 million tonnes, down roughly 500,000 tonnes from 2019.
China's overall bean imports are forecast to be affected by the drop in soyoil consumption. According to two international trading company traders headquartered in China, the country barely covered roughly 30% of its monthly soybean import need in July and only 20% in August.
The low demand for edible oil comes at a time when soymeal, a protein-rich animal feed component generated during the crushing process, is also in short supply.
According to the China Feed Industry Association, China's industrial animal feed output fell about 11% to 22.49 million tonnes in April from the previous year, with swine feed down 15.2% due to high raw material costs and low hog production margins.
Meal trade has been disrupted as COVID-19 related regulatory procedures have been tightened, limiting the flow of feed materials and raising transportation prices.
According to Mysteel, soymeal stockpiles for the week ending May 20 have quadrupled since the end of March, despite consumption declining 5.67 % from a year ago.
Because of restricted global supply, benchmark soybean prices have risen to their highest level in over ten years, squeezing crushers' earnings.
Soybean crush margins in Shandong, China's easternmost province and a major soybean processing hub, have fallen about CNY 1,700 since early March, to minus CNY 218 (minus ~US$32.68; CNY 1 = US$0.15) per tonne as of Monday.
Shi Hengyu, a Zhongtai Futures analyst, said the reasons were because of high overseas pricing and sluggish local demand.
Buyers who had previously curtailed orders owing to poor feed demand are even more hesitant to book too far ahead due to high prices and weak demand, traders and analysts said.