USDA confirms large soybean buying; Rogue trader causes 55m yuan loss

USDA confirms large soybean sales to China last week

The net export sales of US soybean during the week of February 25 to March 3 spiked from the previous period as China ramped up purchases.

The US sold more than 2.2 million tons of 2021/22 soybeans last week, of which nearly 1.1 million tons were confirmed as Chinese bookings, followed by 334,000 tons sold to unknown destinations.

But market sources expect the volume to unknown destinations is also for China.

For 2022/23 new crops, US total net sales last week totalled 895,000 tons. China accounted for 797,000 tons during the week.

Chinese crushers made one of the largest single-week purchase of 55-60 soybean cargoes last week, and more than half of which were bought by state-owned buyers who have the ability to bypass current negative crush margins and secure both nearby and forward supplies.

Meanwhile, China continued to buy sorghums from the US, with the USDA confirming new sales of 72,100 tons last week.

For corn, despite there were no sales to China, more than 800,000 tons of 2021/22 crops were purchased by unknown destinations.

Meat company reports huge loss on rogue trading

Jinzi Ham Company, a publicly traded meat producer in Zhejiang province, was warned by provincial regulators due to a rogue trader at the company who lost 55 million yuan ($8.7 million USD) in miscalculated trades of Dalian hog futures.

The trader first started using hog futures to hedge price risks in January 2021. By September 30, the company had recorded losses on its positions of 55m yuan which nearly offset the entire net profit of the company.

Regulators said the company should have reported the loss when it exceeded 10m yuan in August last year, however the announcement of losses was delayed until January 27 this year.

The company’s share price had been fairly strong before the announcement, hitting 6.18 yuan per share on January 13, the highest level in over a year.

Shortly after the disclosure, the share price slid to 5 yuan this week, a decline of over 20% in less than 2 months.

Hog futures on Dalian Commodity Exchange have been touted as an important hedging tool for companies in the industry, however the derivative contract is also relatively new to many companies that lack the experience of hedging.

As hog breeders continue to face steep losses and liquidity pressure, there is a chance that firms might speculate in hog futures attempting to make back losses or simply find it difficult to make margin calls.

The Dalian May hog futures contract has continued to fall into new contract lows this week. If there are other large losses, or rogue traders, at bigger companies, this could roil the market and add more uncertainty to the already struggling industry.

Imported corn auctions robust, rapeseed oil sales weak

Chinese state stockpiler hosted auctions for imported corn and rapeseed oil national reserves on Friday amid firming domestic prices, but the results differed significantly.

The auction of more than 26,300 tons of imported GMO corn reserves achieved a sale of over 22,800 tons.

In contrast, rapeseed oil auction offered nearly 113,000 tons to the market, but only sold 10% of the volume.

Prices of agricultural products ranging from grains and fertilizers to edible oils and eggs have spiked since 2021 along with higher raw material prices worldwide.

In response, China has accelerated state intervention measures by buying and selling national reserves to the domestic market to balance prices.

As of last Friday (March 4), retail rapeseed oil prices have risen to a new record high of 16.46 yuan/liter, according to the Ministry of Commerce data.

Corn prices have also been trading near its record high of 2,700 yuan/ton ($427 USD/ton).