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Supply Chain

China's Soymeal Futures Plunge On Pig Disease Concerns

China's soymeal futures slid nearly 5% in their sharpest decline in eight years on Friday, as investors took profit and new African swine fever outbreaks stirred concerns over demand.

The most actively traded soymeal futures on the Dalian Commodity Exchange for May delivery fell 4.86% to 3,485 yuan (€445.1) per tonne following four days of gains, amid worries the new pig disease cases would hit demand for the major feed ingredient.

"Prices were rising mainly because soybean cargoes would be limited in March, and people did not think the African swine fever outbreaks were that severe," said a manager with a meat producer in northern China.

"But then as more surveys were carried out in the industry, the market found that disease is really bad," said the manager, who declined to be named as he was not authorised to talk to the media.

Limited Supplies

Chinese crushers were expected to cut operations in March due to limited supplies as rains in top exporter Brazil delayed harvests and shipments.

"There is also some profit taking, which is quite normal," said Wang Xiaoyang, senior analyst with Sinolink Futures.

"Also the African swine fever (ASF) disease is indeed very severe and there are signs that outbreaks are spreading from the north to the south."

Falling Chicago soybean futures following lower U.S. export sales pressured domestic soymeal prices as well, traders said.

"Not-as-expected USDA weekly export sales data further stimulated the willingness of long investors to leave the market, resulting in falling soybean meal prices today," said a Shanghai-based senior trader.

"The downstream demand for soybean meal has been suppressed with the spread of ASF, the sale of unhealthy pigs, and a traditional breeding off-seasons."

Pig Production

Reuters reported in early February on a surge of ASF outbreaks in northeast and northern provinces, hurting pig production even as the country strived to rebuild its massive herd.

Panicked farmers dumped unhealthy pigs at slaughterhouses, causing sharp falls in pork prices, while hog futures rose on expectations of a supply crunch, traders and analysts said.

China's pork prices have dropped almost 30% so far this year to their lowest since August 2019.

Reuters could not independently verify the sale of unhealthy pigs. The Ministry of Agriculture and Rural Affairs did not immediately reply to a fax seeking comments on the recent outbreaks.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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