Cold-chain stocks rally amid infrastructure push
The cold-chain transportation industry in China is gaining plenty of focus on Monday after the State Council issued a statement about the importance of developing the industry in the next five-year plan.
In response, cold-chain related stocks rallied sharply. Share price of Longzhou Group listed on Shenzhen Stock Exchange hit limit-up after surging more than 10% during the day to CNY4.14 per share.
Shares of Jiangsu Jingxue Insulation Technology also soared as much as 13% from the previous close to an intraday high of CNY25 per share before sliding to CNY23 per share. Other companies in the same industry including COFCO Engineering & Technology, and Eastern Air Logistics all saw their shares jumping as much as 7-10% during the day.
The rally came against the backdrop of a clear push from the Chinese government to improve cold-chain transportation infrastructure in the country.
At a recent press conference, the Ministry of Transport highlighted the importance of upgrading the infrastructure to ensure the quality of fresh products and to reduce food losses.
The Ministry of Commerce also mentioned the need to improve facilities in agriculture production areas, along with the Ministry of Agriculture which characterized cold-chain infrastructure in the ‘first kilometer’ from production areas.
Cold chain infrastructure is a relatively niche area that has been getting an increasing amount of government scrutiny in recent years as it supports other major policy goals such as “rural revitalization” and poverty elimination, and reduction of food waste.
Farmers in the countryside have difficulty selling their higher-value produce outside their immediate area due to the lack of cold-chain processing and storage facilities. Additionally, lack of cold storage facilities and transportation also leads to more food loss during transportation.
High fertilizer prices still pose threat on yield, production
Fertilizer prices in China have spiked to a strong level this year which could potentially threaten the country’s crop production as farmers swich to cheaper alternatives to dodge rising planting costs.
The rise in fertilizer prices meant that planting costs for farmers rose by 750 yuan per hectare ($48/acre), according to a manager of farmer cooperative in Hunan province in central China who was interviewed by Chinese newswire Economic Daily.
The amount of rapeseed and fresh vegetables in his country was down by a third this autumn as farmers switched to cheaper fertilizers from expensive compound fertilizer that supports yield, the same manager added.
Some farmers were said to simply cut usage of fertilizer due to high price.
Fertilizer prices in China spiked in the second half of 2021 amid global supply chain disruptions. Urea prices in the country almost doubled this year to 3,144 yuan/ton (US$494/ton), reaching the highest level in a decade.
As a result, China released state reserves and limited fertilizer exports to cool domestic prices. Factory output across the country ramped up in November this year to 150,000 tons per day and prices eased.
To get extra context on China’s fertilizer market, check out our previous coverage.
China soybean cargo buying tanks as front-month demand plateaus
Purchases of soybean cargoes by Chinese importers slowed drastically for the week ending December 10 as demand further shifted to 2021/2022 new crops in Brazil and buying interest for January 2022 shipment was quiet.
There were only about 12 cargoes traded last week, among which more than half were booked from Brazil for shipments in the first and second quarters of 2022, market sources told Sitonia Consulting.
This was sharply lower than 25 cargoes booked the week before. Furthermore, the majority of purchases during that week were for December 2021 through January 2022 shipments as Chinese buyers flocked to cover their front-month demand from the US amid a tightening buying window.
However, as front-month demand coverage is near completion, Chinese buyers have begun to navigate their buying actions more towards new crops in Brazil.
Meanwhile, crush margins were mostly steady with March 2022 shipment from Brazil valued at around $11/ton and April through June shipments at $7-11/ton based on Sitonia Consulting data.
For US soybeans, margins for prompt shipment are in the negative territory with January shipment calculated at -$5/ton.
Delayed cold snap amid a warmer year, crop concerns remain
Temperatures have turned colder in the major northeastern growing regions over the weekend. Jilin and Heilongjiang provinces both saw their daily high temperatures remain below freezing point today.
However, this winter has seen dramatically warmer than normal temperatures with large areas of the region seeing temperature anomalies which exceeded 6 degrees C (11 F) higher than normal over the past ten days. This continues to fuel worries about moisture and mold damage to the corn crop being stored in the region.
Daily covid cases remain elevated
China reported 80 new locally transmitted covid-19 cases with 74 in coastal Zhejiang province, 5 in Inner Mongolia, and 1 in Shaanxi.
These outbreaks continue to weigh on travel, tourism, and restaurant demand in China. Harbin also announced a recall of Russian frozen shrimp which tested positive for coronavirus on the packaging.
When the delta variant first appeared in China in June it proved more difficult to contain and health officials had to significantly expand the scope of their contract tracing and quarantine efforts.
With the more infectious omicron strain spreading globally, it will be only a matter of time before health officials in China will need to battle this new variant.
As of Saturday, a total of 2.6 billion doses of the two-dose Chinese vaccine have been administered within the country. Health officials are ramping up efforts to get adults booster shots and pushing to increase vaccinations of the elderly, a group with relatively lower vaccination rates.