Market attention is split between divergent weather patterns in producing regions, with soybeans seeing the strongest support amid fluctuating oilseed and protein meal markets this week. Prices initially faced pressure from a decline in crude oil and lower temperatures, causing oilseed products to fall more sharply than protein meals. However, a broad market rally on Wednesday attracted increased capital inflows, with soybeans leading the gains.
Weather remains the central focus. High temperatures in July across key producing regions, including US soybeans, Canadian rapeseed, EU rapeseed, Russian sunflower seeds, and Ukrainian sunflower seeds, have led to a general decline in soil moisture. This heat raises the risk of downward adjustments to oilseed yields, although current crop growth remains at normal or slightly above-normal levels. The August supply and demand report is expected to revise oilseed yields, with strong downward pressure anticipated for Australian rapeseed, EU rapeseed, Ukrainian sunflower seeds, and Russian sunflower seeds. Meanwhile, expanding and intensifying drought conditions in Malaysia and Indonesia are exacerbating negative impacts on oil palm, supporting expectations of reduced palm oil production in the future. In China, high temperatures, excessive rainfall, and limited sunlight in July in the northeast have been unfavorable for crop growth, strengthening expectations of lower soybean yields. Weather forecasts indicate potential further rainfall in mid-August, and its impact on regional crops is being closely watched.
Demand factors are also in focus. For edible oils, consumption is primarily tied to India's pre-Diwali holiday stocking, with August serving as a pre-purchase window and concentrated procurement expected to begin in September. Biodiesel demand is closely linked to crude oil, which is trading cautiously amid ongoing volatility in the Middle East. Domestic edible oil terminal consumption remains sluggish, with intermittent bursts of volume, showing little change from last week. In contrast, domestic protein meal volumes have picked up, with terminal offtake staying high. As a result, domestic inventory pressure for protein meals is currently lower than for edible oils, with rapeseed oil pressure being lower than palm oil, which is in turn lower than soybean oil. In summary, next week's focus will be on two major supply and demand reports and weather outlooks for producing regions. Amidst a mix of bullish and bearish factors, oilseeds and protein meals are likely to maintain a volatile, sideways trend.
In the egg market, futures prices rebounded from recent lows this week as sentiment improved. The main September 2609 contract saw a weekly increase of 5.47%, closing at 4,165 yuan per 500 kilograms. Persistent high temperatures continue to pressure spot prices, but expectations of a recovery in demand with cooler weather and the third-quarter peak consumption season are providing support. After futures fell to a recent low, market sentiment recovered, driving the price rebound. Spot egg prices, however, continued to decline before a slight recovery, ending the week lower overall. High temperatures weakened demand, dragging down prices, with average market digestion being general in the early part of the week. Towards the weekend, downstream buyers took advantage of low prices to replenish stocks, leading to slightly improved offtake and a modest price rebound. On the supply side, increased chick placement in April and May corresponds to a continued rise in new laying hen inventory for August and September. On the other hand, culling has also been increasing. Data from Zhuochuang shows that old hen culling reached 20.63 million units as of August 6, marking four consecutive weeks of increase and hitting a record high for the same period since 2021. The proportion of older hens awaiting culling in July was 10.08%, higher than last year and also a record high for the same period since 2021. If the increase in culling persists, it could offset the rise in new laying hens from April-May chick placements. Looking ahead, as temperatures drop and demand recovers into the peak consumption season, demand is expected to support spot prices, with potential for a rebound. Market sentiment has improved, leading to a futures price rebound from lows. The sustainability of this rebound and overall market sentiment will be key watchpoints.
In the corn market, rainfall in major US corn-producing areas has alleviated drought conditions, while grains globally show a pattern of external strength and internal weakness. Internationally, drought impacts and rainfall expectations are intertwined, with the market closely watching the August USDA report for area and yield estimates. Late July rains eased drought, but US corn condition ratings stand at 61% good-to-excellent, down from 73% last year, highlighting ongoing weather concerns. French wheat condition ratings are at 34% good-to-excellent, down from 69% last year. Wheat futures fell due to pressure from the energy market. Analytical agencies predict a significant increase in US corn production, with both output and yield estimates exceeding the July USDA report. Traders are shifting focus to the August USDA report, following analysts' upward revisions to corn yields and production, and expectations of higher planted acreage. The industry is beginning to question the certainty of corn acreage, noting that much of the area was either too dry or flooded, introducing significant uncertainty into production forecasts. Domestically, corn market prices continued to weaken. As of August 6, the national average weekly corn price was 2,316 yuan per ton, down 10 yuan per ton or 0.43% from the previous week. By region, hot weather in the northeast has increased instances of mold at the top of corn cobs, causing significant losses for traders who are generally willing to sell. Feed companies are purchasing cheaper alternatives, and processing plant operations are average, with downstream buyers remaining cautious. In north China, trader inventories are high year-on-year, and unfavorable weather for corn storage, coupled with the upcoming arrival of spring corn, has increased traders' willingness to sell, leading to ample supply. Terminal markets in sales areas are focused on just-in-time procurement, with no concentrated stocking phases. Overall market offtake is slow, and short-term corn markets in these areas are expected to grind lower, gradually destocking. On the futures market, corn prices continue to oscillate, with expectations of a weak oscillation as alternative supplies and new crop arrivals pressure prices.
In the live hog market, spot prices oscillated higher this week, and futures prices stopped declining and rebounded. As of August 6, the national average live hog price was 10.36 yuan per kilogram, up 0.16 yuan per kilogram from the previous week. The benchmark price in Henan province was 10.33 yuan per kilogram, down 0.35 yuan per kilogram. At the beginning of the week, the transition between months led to weak selling intentions from farmers, tightening supply and pushing prices up. As farms resumed normal slaughter schedules, supply increased, leading to a slight price pullback. Cross-provincial transport disruptions due to quarantine ticket controls in some areas created local supply gaps. Additionally, the Start of Autumn solar term slightly boosted consumption, with prices rising again. Overall, prices increased for the week. Data from Zhuochuang shows that the price of replacement gilts was 1,410 yuan per head on July 31, up 3 yuan per head from the previous month. Piglet prices fell week-on-week, averaging 232 yuan per head as of August 6, down 37 yuan per head. On the supply side, sow farm sales plans are normal, with stable piglet supply. On the demand side, despite a rebound in live hog prices, the overall market remains weak, reducing downstream replenishment demand and pushing piglet prices down. The average slaughter weight increased week-on-week, reaching 124.11 kilograms per head as of August 6, up 0.19 kilograms. The weight differential between slaughter and purchase weights began to widen as slaughter weights stopped falling and purchase weights stopped rising. Early in the month, farms reduced sales and increased weights, with larger pigs being held back in anticipation of higher prices, slowing the slaughter pace and pushing up average weights. Data from Zhuochuang on August 6 shows that farrow-to-finish profits were -213 yuan per head, with losses narrowing by 22 yuan per head from the previous week. Nursery pig fattening profits were -259 yuan per head, with losses narrowing by 6 yuan per head. Reduced slaughter from farms at the start of the month, combined with demand support from the Start of Autumn season and increased processed meat volumes, created a situation of reduced supply and increased demand, pushing live hog prices higher on an oscillating trend. The theoretical profit for farrow-to-finish operations increased slightly month-on-month, corresponding to a narrowing of losses. Driven by optimistic sentiment from the stabilization of spot hog prices, the near-term futures contract led gains in the latter half of the week, with deferred contracts also rising. The market holds optimistic expectations for consumption after the Start of Autumn, leading to a stabilization and uptrend in near-term contract prices. Next week, attention will remain on the recovery of demand following the Start of Autumn and cooler temperatures, and the potential for improved supply-demand dynamics.
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