Meal futures rally extends on bullish Wasde outlook, hog futures flatline
Futures for soybean meal and rapeseed meal in China extended the rally in recent days by closing another 1-2% as traders began to price in the bullish expectation that USDA could lower its estimate for US soybean crop yield in the upcoming Wasde report late Friday.
The most traded soybean meal futures contract (January 2023 delivery) on Dalian Commodity Exchange (DCE) rose nearly 1% higher at 3,761 yuan/ton ($559/ton), the highest level in seven weeks.
Rapeseed meal futures on Zhengzhou Commodity Exchange (ZCE) strengthened 1-2% across the board with the main contract up 1.6% to 2,906 yuan/ton ($432/ton), which is also a 7-week high.
Market consensus reflects a wide expectation of lower US soybean crop yield this year due to hot weather this year.
Oilseed futures in China followed meal futures to the upside with both GMO (No.2) and non-GMO (No.1) soybean futures on DCE up 1-3% on the day. But rapeseed futures on ZCE traded sideways because of a lack of liquidity.
Moreover, edible oil futures continued to rise as improved demand for palm oil exports from Malaysia and Indonesia fueled market optimism.
DCE palm oil futures jumped 3-4% across the curve on Friday, trailed by DCE soybean oil futures that gained 1-2% and ZCE rapeseed oil futures that rose 3-4%.
Edible oil futures are also at the highest point in seven weeks despite that crude oil futures remained in a downward trend.
For grains, DCE corn futures chased stronger CBOT corn futures higher. The main contract on DCE bounced more than 1% higher to 2,757 yuan/ton ($410/ton).
Meanwhile, egg futures continued to tick higher with the most liquid contract on DCE hitting 4,142 yuan per 500g ($1,231/ton). Hog futures mostly traded in a tight range on Friday, and largely closed sideways.
Covid Update – July travel volume slumps before cases spike in August
Covid cases continue to rise across China this month and have reached the highest level since early May. While case counts ebbed in the last part of July, August has seen a sharp and rapid rise. Daily cases on August 1st were 373 but reached 1,850 on August 12th.
The latest China Transportation Production Index, which is a composite of passenger and freight volumes across all modes, actually fell in July and was down nearly 4% compared to June. The index is down 7.9% year on year.
The sub-indices show a major contrast in transportation, with the freight sub-index rising 0.7% compared to last year and recording the first year-on-year growth since March.
In contrast, the passenger transport sub-index is down over 31% year on year. This weakness is notable because it came before the latest uptick in cases.
Tourist destination Sanya, which locked down on August 2nd after finding a single covid cases, reported 1,204 new cases on Thursday with many tourists still stranded on the island.
The central government is trying to improve the domestic travel situation by having provincial health tracking apps recognize Covid test results from other provinces.
At present, most provincial health apps do not share this data which creates problems and delays for people travelling between provinces.
July poultry sales rebound sharply
Poultry sales in China last month rebounded strongly thanks to robust seasonal demand in the summer.
Wen’s Group sold nearly 92 million heads last month, down 4% on the year. But sales revenue surged 48% year on year to more than 2.9 billion yuan ($431 million) amid higher prices.
Major meat processor Fujian Sunner Development achieved a revenue of 1.66 billion yuan ($247 million) in July, up 32% on the year. The growth in poultry meat segment alone was more than 22% year on year.
Other companies such as Hunan Xiangjia Animal Husbandry also reported stronger sales volume and higher revenue.
Demand for poultry have ramped up in the summer ahead of the wave of national holidays in China in late September and early October.