October 25, 2022


China braces for tighter soybean supply, hog prices rise as a result


China's soybean stocks are set to tighten further as delays in shipments from the United States deepen shortages of key animal feed ingredient soymeal, keeping prices at record highs.


Ships carrying up to three million tonnes of US soybeans which were scheduled to arrive this month and in November are likely to get delayed by about 15 to 20 days, two soybean traders told Reuters.


While US cargo delays are likely to weigh on benchmark Chicago soybean futures, tight soymeal supplies will buoy Chinese hog prices. Prices in Guangdong, one of China's largest pork consuming regions, recently hit one-and-half year highs and have risen nearly 60% since March.


"China's soymeal supply is very tight at the moment and it is getting worse with US cargoes arriving late," said one Singapore-based trader at an international trading company, which owns soybean crushing plants in China. "Soymeal prices are going to remain high as this tight supply situation will continue until the year-end."


In 2022/23, China will ship an estimated 98 million tonnes of the oilseed, according to the United States Department of Agriculture.


"Hog farmers are looking for alternative protein sources as they have reduced the amount of soymeal in feed," said a second Singapore-based trader. "This is going to support pork prices."


China's consumer prices rose to 29-month highs in September, driven mainly by pork prices.


Higher hog prices have also boosted demand to raise more pigs and raise them to heavier weights, increasing demand for animal feed.


US soybean exports are trailing their normal autumn pace despite rising supplies from an accelerating harvest, as low river levels in the US have slowed the flow of grain barges to export terminals, according to United States Department of Agriculture (USDA) data.


Shippers have reduced barge tows by nearly 40% and cut the amount of grain loaded in each barge to prevent groundings in drought-parched waterways.


"Chinese buyers did not cover their requirements for enough beans in July, August and September," said a Beijing-based trader with an international trading firm. "The price was very high so they hesitated to take beans and just covered 80% of the shipments. Then we had the Mississippi river issue. Cargoes supposed to be loaded in October will roll to November."


China's soybean imports are likely to fall to their lowest in more than two years this month, having dropped in September and August.


- Reuters

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