Covid cases spike; Oil futures lead rally

Covid cases continue to spike and weigh on consumer demand  

China reported 807 new Covid infections on Sunday as the outbreak in Sanya led to a sharp uptick in cases.  

The tourist region was relatively unprepared for a large outbreak. On Monday, Guangdong said it had dispatched over 500 medics to the island to assist in epidemic control measures. The local government also said it had ramped up testing capacity and the problem of highly delayed test results would soon be fixed.  

Market regulators also said they were cracking down on price gouging and were working to handle complaints related to the price of rice, cooking oil, pork, fish, and eggs.  

The local government also said it had reserved 43 hotels for quarantining of Covid patients and close contacts, representing 11,000 rooms and currently has 7,800 rooms available. Officials also said they had plans to create 25,000 field hospital beds in places such as a school dormitories, hotels, and gymnasiums.  

Many coastal areas also warned fishermen against interacting with any overseas fishing vessels. The current outbreak has been linked to a fisherman who may have had contact with foreign fishermen who had Covid.  

While many local governments are doing voucher schemes to encourage tourism and consumer spending, the highly visible outbreak with tourists stranded in Sanya is likely to weigh on travel spending in the second half of the year. 

Oil leads soybean complex futures rally, egg futures sink

Edible vegetable oil futures in China were mostly bullish as low stocks level in the south pushed cash prices higher.

Palm oil futures on Dalian Commodity Exchange jumped 4-6% on Monday, pulling soybean oil and rapeseed oil futures up by 2-3%. Stocks of three major types of edible oils – palm oil, soybean oil and rapeseed oil have been hovering at a low level.

Margins for palm oil imports have begun to widen as cash prices in China continued to hike.

At the same time, soybean meal and rapeseed meal were lagging behind with prices ticking less than 1% higher on the day. Crushers were said to be struggling with spot sales at the moment, which caused their inventory level to swell.

Corn futures in China also traded sideways on Monday with the curve edging 0.3% higher.

In contrast, egg and hog futures were under serious bearish pressure with the futures curve of the former down 1-6% and the latter down 1-3%. The most liquid egg futures fell to the lowest level since late September last year.