Oils and Oilseeds: Market Enters Critical Week, Awaiting Directional Breakout for Oils and Meals This week, oils and oilseed meals traded within a range, with prices rallying before retreating, leaving the market in a consolidative pattern. Next week is poised to be pivotal for the oils and oilseed meals market. On the macro front, the U.S.-Iran conflict may be entering a temporary lull, with nations eager for energy logistics to resume. Market expectations for the reopening of the Strait of Hormuz are rising as participants await the realization of bearish factors. Concurrently, there is market speculation that former U.S. President Trump may visit China around May 14-15, with major power relations often setting the macro tone for the period ahead. Fundamentally, the USDA's May World Agricultural Supply and Demand Estimates (WASDE) report, scheduled for release on the 13th, will for the first time unveil supply and demand projections for the 2026/27 season. The market anticipates a slightly loose global oilseeds balance; attention will be on the actual data and how it adjusts near-term versus long-term expectations for oils and meals. Following this report, market focus is expected to shift towards new-crop conditions, officially commencing the weather-driven trading season. Additionally, the Malaysian Palm Oil Board (MPOB) will release its monthly report. Market expectations point to a slight drawdown in Malaysian palm oil inventories, as production pressures outweigh consumption. Should inventory data exceed expectations, it would reinforce the current near-term weakness. Under the influence of these multiple factors, volatility in the oils and oilseed meals market is anticipated to increase next week, with price ranges likely to expand and potentially break out of the recent consolidation. Strategically, consider long volatility positions. For futures, focus on short-term directional trades, unwind calendar spread positions (selling nearby, buying deferred), and exit inter-oil spread trades.
Eggs: Spot Prices Experience Minor Correction, Main Contract Shows Resilient Fluctuations 1. During the holiday period, egg spot prices continued their upward trend. However, on the first trading day after the holiday, the main egg futures contract (2606) experienced a slight correction, with deferred contracts falling more than nearby ones. Subsequently, on Thursday, the main 2606 contract rebounded supported by spot prices, gaining 2.1% on the day, though deferred contracts underperformed nearby ones. On Friday, the main 2606 contract opened higher but retreated in the afternoon, closing up a marginal 0.03% for the day. Due to current position limit rules, monitor trading opportunities in deferred contracts. 2. During the May Day holiday, terminal consumption exceeded expectations, supporting continued strength in egg spot prices. Phased analysis shows an initial rebound, with the pace of gains slowing towards the holiday's end. Post-holiday, spot prices entered a period of adjustment, experiencing a slight correction approaching the weekend. As of May 8th, the daily average price for brown-shell eggs in China, according to Zhuochuang data, was 4.09 yuan/jin, up 0.28 yuan/jin from pre-holiday levels. 3. The latest monthly inventory data from Zhuochuang shows that as of April 30th, China's layer flock stood at 1.34 billion birds, a month-on-month decrease of 1.03%. The structure indicates a decline in the productive flock. Short-term supply pressure has eased somewhat due to increased monthly culling of older birds. However, it's important to note that chick placements, as indicated by sample sales data, continue to rise, pointing to increased new supply before August. Furthermore, with improving farming profits, the willingness to cull among producers continues to weaken. As of May 7th, weekly culling at Zhuochuang sample points was 17.44 million birds, marking the third consecutive week of decline. If future culling recovers or remains high, it will aid in capacity reduction; otherwise, supply will continue to pressure egg prices. On the demand side, as southern China gradually enters the rainy season, egg spot prices are likely to be affected by cautious stockpiling among traders, increasing the probability of a seasonal correction. Nearby contracts are influenced by spot prices and show relative strength, while deferred contracts are weaker. Consider small short positions on rallies, while remaining alert to potential disruptions from increased culling or strength in related commodity prices.
Corn: Rice Policy Exerts Downward Pressure, Corn Futures Decline International Markets: This week, U.S. wheat and corn prices rose initially before falling back, with corn outperforming wheat. In the wheat market, forecasts of rainfall in the U.S. prompted profit-taking and price declines. The U.S. winter wheat condition rating was 31%, above expectations of 30% but the lowest for this time of year since 2023. Spring wheat planting progress reached 32%, below the five-year average. In the corn market, prices fell on Tuesday due to profit-taking and farmer selling. U.S. corn planting progress is at 38%, above the five-year average. Expected rainfall in the U.S. Midwest has raised concerns about potential delays in soybean and corn planting. In the soybean market, expectations for Brazilian soybean production have been revised upwards. Corn and soybeans are widely used for biofuel production, amplifying the impact of crude oil price volatility on grain and oilseed markets. Domestic Market: This week, domestic corn prices largely remained within a narrow range. As of May 7th, the national weekly average corn price was 2402 yuan/ton, down a marginal 1 yuan/ton from the previous week. Regionally, prices in Northeast China were mostly stable, with subdued market activity during the May Day holiday leading to minimal price adjustments. However, post-holiday, rumors regarding the auction of over-aged rice reserves exerted bearish pressure, weakening futures prices and leading to a slight decline in northern port purchase prices compared to pre-holiday levels. In North China, corn prices at deep-processing enterprises rose initially before falling, but overall movements were limited within a 10-20 yuan/ton range, with grassroots prices remaining relatively stable. Corn prices in consumption areas were steady to weak. The weaker futures market exerted some pressure on spot prices, leading to lower offers. Downstream demand was primarily for immediate needs, with companies purchasing as needed and showing weak willingness for large-scale stockpiling, resulting in generally subdued trading activity. Technically, the bearish news regarding rice supply entering the market has pressured corn futures lower. For the main corn contract (2607), short-term support is seen at the 2340-2350 integer level, with further support expected from long-term moving averages. If these levels fail, the downside target is around 2300 yuan/ton.
Live Hogs: Post-Holiday Consumption Pressure, Hog Prices Expected to Fall Before Rising 1. During the May Day holiday, concentrated entry of secondary fattening operations in Northeast China provided a boost, with short-term sentiment improvement driving a temporary price surge. Subsequently, as market sentiment cooled, prices resumed their downward trend. As of May 7th, the national average hog price was 9.66 yuan/kg, down 0.08 yuan/kg from the previous week. The benchmark delivery location in Henan recorded a price of 10.13 yuan/kg, down 0.05 yuan/kg week-on-week. Post-holiday consumption has entered a seasonal lull. The hog market remains in a state of strong supply and weak demand. In the absence of supportive policies like government stockpiling, hog prices are trending weakly. 2. Zhuochuang data shows that as of May 1st, the sales price for replacement gilts was 1420 yuan/head, down 28 yuan/head from the previous month. 3. As of May 7th, the average price for piglets was 229 yuan/head, up 16 yuan/head from the previous week. While fattened hog prices experienced a minor correction, market consensus suggests limited further downside. Simultaneously, as it is the traditional peak season for restocking, enthusiasm among some large-scale enterprises continues to increase, supporting high prices for quality piglets in some regions. Rising demand for piglets is contributing to the overall upward trend in hog prices. 4. This week, the average trading weight for hogs continued to increase. As of May 7th, the average slaughter weight at Zhuochuang sample points was 125.42 kg/head, up 0.17 kg/head from the previous week. Large-scale farms have reduced their monthly slaughter plans, slightly easing market pessimism. Hogs held back during the recent holiday period are gradually being sold, leading to a steady increase in slaughter weights. 5. Wind data shows that as of April 29th, the government-reported hog-to-corn price ratio was 4.13. 6. Zhuochuang data indicates that as of May 7th, profits for farrow-to-finish operations were -288 yuan/head, with losses widening by 8 yuan/head from the previous week. Profits for piglet fattening operations were -158 yuan/head, with losses widening by 7 yuan/head. While farming costs remained relatively stable, the slight correction in hog prices this week led to decreased profits (widened losses). The hog farming industry remains in a loss-making phase. 7. Post-holiday terminal demand has retreated, leading to a decline in slaughterhouse operating rates. Zhuochuang data shows that as of May 7th, the operating rate at sample slaughterhouses was 36.93%, down 1.27 percentage points from the previous week. At the start of the week, supported by holiday demand, operating rates were relatively high before declining as demand faded. Next week, as temperatures gradually rise, household and餐饮 purchases may decrease, and operating rates are expected to continue a slight downward trend. 8. Post-May Day, the hog futures market exhibits a pattern of nearby strength and deferred weakness. Hog prices during the holiday outperformed expectations, providing support for nearby contracts. On Friday, increased short positions in the hog futures 2609 contract pressured prices lower. The build-up of short positions in deferred contracts led to a contraction of the price premium for those contracts. New long positions may consider waiting for the completion of this adjustment before entering.
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