Quick Insight: Low soymeal stocks in China could further upset hog price

Commercial soybean meal stocks in China continued to hover near the lowest level in 11 months as strong feed demand from the hog industry outpaces soybean imports.

Based on Sitonia Consulting survey of major crushers and traders, the average of commercial soymeal stocks estimate in China currently comes in at around 550,000 tons, the lowest level since mid-January last year.

Some analysts at major international crushers expect the stocks level to remain at around 500,000 tons until the start of Lunar New Year holiday season in late January 2022.

“500,000 tons are almost equivalent to nothing,” one China-based soybean trader commented.

The normal range is around 700,000-800,000 tons, but this figure excludes any national stockpile the government manages.

Soymeal stocks in China have been falling since this summer largely due to strong procurement from feed companies, and demand was essentially fuelled by a rapid growing pig herd across the country.

This was also against the backdrop of weak Chinese soybean imports in October (5.11 million tons) and November (8.57 million tons) this year, down 41% and 11% year on year respectively, according to China Customs data.

Chinese buying of soybean cargoes have slowed further in December due to weaker margins.

Traders expect that if China were to book only around 5 million tons of soybeans for January shipment as per current projection, the world’s largest hog producer in the world could face tight soymeal supply soon.

“Pigs need to eat,” said a second soybean trader at a major trading house.

This could signal further pressure on hog margins in China. Rising feed prices have pressured producers and many farmers who are operating near break-even levels.

It could be a matter time until a slight further drop of soymeal stocks trigger a wave of herd dumping in the hog market as hog producing companies would try to limit deepening losses given rising feed price.

Some major hog producers in China have begun to have short-term cash flow issues due to excessive expansion and low price.