Renminbi weakens to 1-yr low; Covid cases fall but more areas face lockdowns

RMB weakens to 1-yr low as China cuts benchmark lending rates, futures firm 

Futures market in China was in a bullish mood on Monday after the country’s central bank cut its one-year Loan Prime Rate by 5 basis points to 3.65%, in a move to inject more liquidity into the world’s second largest economy. 

More agricultural futures traded higher on Monday benefiting from the expansionary policy from the People’s Bank of China as well as the imminent settlement date for September contract. 

The Chinese renminbi continued to weaken due to the rate cut. The exchange rate of USD/CNH jumped to its one-year high of 6.83 on Monday, a one-year low for the renminbi inversely. 

Edible oil futures were up 1-4% on Monday with palm oil contracts on Dalian Commodity Exchange (DCE) being the biggest gainer across three major oil types, up 3-4% on the day. The main contract was up 3.57% at 8,526 yuan/ton ($1,248/ton). 

Soybean oil futures also jumped more than 2% across the curve, along with rapeseed oil futures on Zhengzhou Commodity Exchange (ZCE) that rose 1-2%. 

For feed ingredients, futures were mixed. Soybean meal contracts ticked about 1% higher on the day amid slow soybean cargo buying progress for September shipment, while corn futures were unchanged on the day as the impact of bullish CBOT corn futures offset bearish pressure from new harvests in China. 

Meanwhile, hog futures were strong on Monday with the main contract on Monday breaking the recent high of 23,220 yuan/ton ($3,400/ton) in mid-July this year to hit 23,350 yuan/ton ($3,419/ton) by market close, the highest since mid-May 2021. 

Hog futures in China rallied against the backdrop of better demand expectations. 

Conversely, egg futures dipped less than 1% across the curve amid a quiet session on Monday. 

Covid update: cases fall but more areas face lockdowns 

Covid cases in China have come down slightly in recent days but Sunday still saw 1,824 new cases across 26 provinces and regions. 

Lockdowns are still happening across the country, with Jiangxi, Hainan, Guizhou, Henan, Xinjiang, Hebei, Heilongjiang, and Shanxi all announcing localized lockdowns in the past day.  

Trains services are also facing stricter measures after 29 passengers on a long-haul train service from Tibet to Beijing tested positive for Covid. The train service, which runs over 3,700 kilometers, transited through 5 provinces and regions, raising fears among officials about new cases being introduced to their regions.  

As of Sunday, the national railway carrier announced that it would introduce ‘static management’ of carriages and prevent travellers from moving between train carriages in order to minimize the mixing of passengers from different regions.  

The lockdowns also continue to weigh on food and agricultural demand. Xi’an Catering, a large restaurant group, said it would be suspending in-person dining at 19 of its restaurants in Xi’an. Other areas continue to impose capacity restrictions, with Hainan’s capital of Haikou limiting in person dining capacity to 50%. 

Haikou has reported finding no new cases outside of quarantined populations for six consecutive days, but also announced that train services to the city would remain suspended through at least the 24th