Livestock and feed prices update
Stronger dollar further squeezes Chinese import appetite, futures mixed
US dollar continued to strengthen against the Chinese renminbi on Wednesday, pushing the spot exchange rate above the threshold of 7.2 yuan per dollar for the first time in more than a decade.
The onshore spot rate of USD/CNY hit 7.228 by futures market close time, the highest level since January 2008.
Analysts are projecting the exchange rate to increase further and potentially hit 7.35 before the end of first half of 2023, which is going to raise the cost of imports for Chinese buyers of agricultural goods and other commodities.
Rising dollar as a result of a tightening monetary policy from the US central bank coupled with a loosening measure from the Chinese counterpart has begun to hurt Chinese demand.
“The renminbi is too weak… Market is very quiet and clients have disappeared,” according to one US-based physical broker for soybeans and grains into China.
“These are the two main reasons why the market is quiet [this week],” one trader from a major grain trading house commented, referring to weak import margins and poor exchange rate.
Nevertheless, domestic agricultural futures were mixed heading into the week-long public holiday starting this Saturday.
Dalian palm oil futures sank 1-3% across the board, followed by soybean oil futures that dipped slightly on the day. In contrast, rapeseed oil futures on Zhengzhou Commodity Exchange (ZCE) jumped 1-5% across the curve as spot supply tightness pulled the whole curve up.
The November contract just nearly 5% on the day.
ZCE rapeseed meal futures moved largely in line with the oil, also up 1-5% amid concerns of low supply.
Domestic oilseed futures mainly traded lower on the day amid ongoing harvest. But the No.2 soybean futures for imported GMO beans ticked marginally higher due to recent slowdown of cargo purchases as margins worsened.
As far the protein sector, live hog futures extended the rally for the second consecutive day ahead of the holiday. Egg futures also edged about 1% higher against the backdrop of weaker cash prices which fell 2% since the beginning of September.
Dalian Commodity Exchange holiday hours
The Dalian Commodity Exchange announced it will be closed from Saturday October 1st and will reopen on Monday October 10th for the National Day holiday.
There will also be no night trading session on Friday September 30th.