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Daily Review on Meal Market in China--16/1/2020

2020-01-16 www.cofeed.com
Today (Jan. 16), the market for meals in China is shown as follows:

Soybean meal: China and the U.S. officially signed the trade deal in Washington last night, but they did not announce specific volumes by commodity, except the total purchase amount. Therefore, traders remained skeptical about whether China would boost purchases of U.S. soybeans in the face of bumper crop in South America. US soybean declined last night despite the signing of the deal. Meal futures slightly fall on the Dalian Commodity Exchange today. And DCE soybean meal is relatively resilient as traders square positions in oil futures which have been dropping sharply on bearish factors in sessions. Soybean meal spots steadily fluctuates by 10-20yuan/tonne with light trading. Specifically, the price settles at 2610-2770yuan/tonne today. (Tianjin 2770, Shandong 2680-2690, Jiangsu 2635-2670, Dongguan 2610-2640, and Guangxi 2640-2660.) Under the phase-1 trade deal which has been signed officially, China has committed to ramp up agricultural purchases from the U.S. by $12.5 billion and $19.5 billion respectively in 2020 and 2021, compared to a baseline of around $24 billion in 2017. The total agricultural purchases will be $80 billion over the two years. To realize such a sharp increase, soybean, pork and poultry meat imports from the U.S. are bound to be growing. And DDGS, one alternative meal of soybean meal, may also get opened again. On the demand front in China at present, aquaculture has been slack in winter, and hog stocks will not recover until the second quarter this year; hence, soybean meal will have lower demand in the first quarter. And feed enterprises do not make bulk purchases for the festival for a lack of confidence in the market. All these are weighing down soybean meal prices. But there is one bullish factor--falling oil prices recently. Buyers are suggested to make appropriate replenishment on the dips and remain cautious in chasing after high prices. 

Imported rapeseed meal: Imported rapeseed meal prices are stable with a slight rise, of which it partially settles up 10 yuan/tonne at 2,170-2,180 yuan/tonne in coastal areas (Guangxi 2,180, up 10; Guangdong 2,170; Fujian 2,180). The supply of rapeseed is still tight amid tensions between China and Canada, so the operation rate is lower, and oil mills prop up prices. The soybean crush has stayed at an extremely high level in recent weeks thanks to the good crush margin, and DDGS imports may be opened. But with demand from aquaculture entering into an off season, soybean meal prices are softer, which limits the price rises of rapeseed meal. Therefore, short-term market is expected to fluctuate narrowly. And buyers can just hold appropriate inventory but not chase up prices too excessively.

Imported fishmeal: Imported fishmeal prices continue to increase by 500 yuan/tonne today with some negotiation space. Peruvian Standard SD with 65% protein content is 11,800-12,000 yuan/tonne; Peruvian higher-quality SD with 65% protein content is 12,100-12,300 yuan/tonne; Peruvian higher-quality SD with 67% protein content is 12,600-12,800 yuan/tonne; and Peruvian Super Prime SD with 68% protein content is 13,000-13,100 yuan/tonne. Peruvian Ministry of Production announced that it concluded the second fishing season in the north-central zone. Domestic traders mostly stall sales with the coming of this bullish news. But logistics companies have gradually closed for the Spring Festival, so there is no bulk trading in the market. Overall, the market is predicted to go strengthening in the short term. Stocks at port: Huangpu 67,000 tonnes, Fuzhou 31,000 tonnes, Shanghai 32,000 tonnes, Tianjin 1,000 tonnes, Dalian 4,000 tonnes, Fangchenggang 1,000 tonnes and 4,000 tonnes at other ports. FOB prices from foreign merchants today: it is all quoted higher by 100 USD/tonne today, 1,480 USD/tonne for Peruvian Standard with 65% protein content and 1,780 USD/tonne for Peruvian super with 68% protein content. Chilean Standard with 65% protein content is also higher by 100 USD at 1,300 USD/tonne, and super with 68% protein content at 1,610 USD/tonne.

Cottonseed meal: Cottonseed meal price stays stable with some declines of 20-30 yuan/tonne today. The price gap between soybean meal and cottonseed meal shows an inversion, and downstream enterprises are not anxious to take goods. In addition, the U.S.-China Phase One trade deal has been formally signed in U.S. last night, and China promises to purchase additional $12.5 billion and $19.5 billion which total $80 billion worth of U.S. farm products over the next two years, above a baseline of $24 billion in purchases in 2017. With such a large increase in purchases, the imports for US soybeans, pork and poultry meat are bound to soar. Also, the imports of DDGS which can replace meals are also likely to be resumed. As a result, cottonseed meal price is depressed by all these factors. But cottonseed price is high, and the operation rate is trending down due to the upcoming Spring Festival. Thus, the price declines of cottonseed meal are also limited. It is expected that cottonseed meal market will be stable and partially fluctuate weakly before Spring Festival. Buyers can maintain a wait-and-see attitude.

(USD $1=CNY 6.88)