Agricultural products fell in the first trading day after China’s New Year 

Affected by 2019-nCoV, the holidays for China’s New Year was extended. On February 3, the exchanges resumed trading. On the first trading day after China’s New Year, the agricultural products sector was in full swing, with the oil sector falling the most.

Vegetable Oil: The main contract of Lian Soybean fell by 125 RMB / ton. The dominated contract of Lian Soybean Oil fell by 454 RMB / ton. The dominated contract of Lian Palm Oil fell by 426 RMB/ ton. The dominated contract of Zheng Rapeseed Oil fell by 386 RMB / ton.

Feed Raw Materials: The dominated contract of Lian Corn increased by 19 RMB / ton. The dominated contract of Lian Soybean Meal decreased by 96 RMB / ton. The dominated contract of Zheng Rapeseed Meal decreased by 78 RMB / ton.

Egg: The dominated contract of egg fell by 241 RMB / ton.

Sugar: Zheng sugar's dominated contract fell 169 RMB / ton.

Futures market depresses vegetable oil market

During the China’s New Year, the international oil price dived. The price of Malaysian palm oil fell by more than 10%, and the price of American soybean oil fell by more than 8%. 

The sharp decline of vegetable oil futures in the external market directly led to a sharp decline in the opening of China’s national oil futures. On February 3, the decline of oil futures was about 400 RMB / ton. Futures market pressure the spot market.

On the other hand, the end industry of vegetable oil, that is restaurant industry, goes into the winter. Vegetable oil price lack in upward driver. The spot price rose with the market. The main quotation of soybean oil in Shandong Province is about 6400 RMB/ ton, a decrease at 500 RMB/ ton comparted with that before China’s New Year. The main quotation of palm oil in Guangdong Province is 6130 RMB / ton, down 300 RMB / ton compared with that before China’s New Year. 

Affected by 2019-nCoV, multiple measurement was taken in the China’s New Year. Collective gatherings are prohibited. Holidays are extended. Schools and Colleges are postponed. Among them, the restaurant industry is severely damaged as the demand is unusually low as people are trapped at home by 2019-nCoV. Palm oil and soybean oil as frying oil are the most affected. 

Meanwhile, to control the spread of 2019-nCoV, the time for many regions to return to work was legally postponed to February 10, which used to be February 1. Some of vegetable oil started up one by one if policy allows. 

On the other hand, local government set the blockage to test passengers’ temperature and maximumly avoid cross-province spread. It is helpful for to control 2019-nCoV, but the blocked logistics and transportation makes the supply of raw materials tight. The supply of soybean oil and rapeseed oil reduced. And small and medium-sized dealers mainly digested the inventory.

At present, the inventory of soybean oil and rapeseed oil is at a low level. The inventory of soybean oil is about 850000 tons, down nearly 9% on a month on month basis. The inventory of rapeseed oil is about 270000 tons, down more than 8% on a month on month basis. In the short term, it is difficult to ease the tight situation of oil supply, which to some extent limits the falling space of oil.

Feedstuff factory delays and raw material market appears to be weak 

After China’s New Year, some vegetable oil plants began to operate one after another. Due to the tight supply of soybean and rapeseed, there is less output of soybean meal and rapeseed meal. The start-up of the end feedstuff factory delayed. 

On the other hand, due to the blockage of many villages and roads, the logistics and transportation were blocked. In addition, the trading of live poultry market was greatly reduced, as government suggested. Aquaculture had not yet started, and the terminal demand was low. The amount of corn and soybean meal purchased by the feedstuff factory greatly reduced. 

There is a chaos in soybean meal quotation. The supply of soybean meal is in tension. A small number of transactions are made. As for corn, corn traders have recently stopped trading. The corn came with a hefty price tag. 

In terms of future, Lian Corn increase slightly while Lian Soybean Meal and Zheng Rapeseed decline. The spot market is quite light. 

Avian influenza strikes, cooling down the consumption of eggs and pigs

After China’s New Year, the feeding industry has entered the traditional consumption off-season. Due to the delay of soybean meal factories and feed factories, farmers are facing short of feedstuff. On the other hand, farmers lack in confidence in making up the column.

This is due to the sufficient pork stock as pre-stock. Plus, 2019-nCoV caused the severe damage to restaurant industry. The demand for meat fells sharply. After China’s New Year, the overall price of pigs was low. And the overall price of eggs fell, falling to 5 RMB / kg, down more than 23%.

On February 1, the Ministry of Agriculture and Rural reported that a highly pathogenic avian influenza (H5N1) epidemic occurred in poultry in Shuangqing District, Shaoyang City, Hunan Province. Affected by the avian influenza epidemic, 17828 poultry have been slaughtered in the epidemic area, and the trading of live poultry market has been closed. The impact of the bird flu epidemic has depressed the market of pigs and eggs, which are already in the off-season of consumption.

Market Forecasting 　　

Li Bing, an analyst of agricultural products of SunSirs, believes that the market of vegetable oil, feed, pig eggs and other markets will continue to be weak in the short term. This is due to the external futures market pressure and the logistics and transportation obstacles. If after February 10, feed factories, oil factories and other enterprises fully resume construction, logistics and transportation is restored, the epidemic of avian influenza is controlled, then the demand for agricultural products will increase and there will be a small rebound. It is expected that the primary and secondary schools will resume their schooling after March. Therefore, the centralized consumption of vegetable oil will increase, and the market of agricultural products will really recover at the end of May and the beginning of June.

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