Oil and Oilseeds: Demand Support, Oil and Meal Prices Fluctuate with a Stronger Bias This week, prices for oils and oilseeds trended higher, with international markets leading the gains domestically. Palm oil showed the strongest performance, followed by the soybean complex, with rapeseed products being the weakest. The U.S. soybean market is focused on demand projections. Firstly, favorable crushing data and expectations for an imminent biodiesel policy announcement are supporting the outlook for U.S. soybean crushing. Secondly, there are divergent views on export demand, with uncertainties centered on China and Brazil. While China's purchase of 12 million metric tons of soybeans has concluded, some expect China to continue significant buying, while others anticipate a slowdown. Brazil's soybean harvest is expected to be large, but progress in January has been slow, with substantial volumes not expected to hit the market until March, providing a temporary respite for U.S. soybeans. Driven by optimistic demand expectations, U.S. soybean prices are trending higher. Domestically, soybean meal prices have halted their decline and started rising, with spot prices leading the gains. Factors such as rising soybean import costs, active procurement by end-users, and strong demand for soybean meal are boosting the market. Expectations of destocking for soybean meal are supporting a stronger price basis. There is disagreement over the potential supply-demand gap for domestic soybean meal in March-April; while total soybean supply is sufficient, timing issues could cause temporary tightness, depending on the pace of Brazilian soybean exports and domestic inspections. Soybean meal is expected to fluctuate with a stronger bias next week. For options strategies, consider a dual short strategy. In the vegetable oils market, Indonesia's decision to postpone the B50 biodiesel mandate and the U.S. plan to announce a biodiesel decision in early March present a mixed outlook for biodiesel policies. The market expects the U.S. to increase biodiesel stockpiling in anticipation of policy implementation. Futures are trading on expectations that Canada's rapeseed tariff might be adjusted to 15%, with import margins for Canadian rapeseed below 100 yuan/ton. Rumors suggest some purchases have already been made for March shipment. Data-wise, favorable Malaysian high-frequency data shows palm oil exports for January 1-20 increased month-on-month, while production decreased over the same period, pointing to significant destocking in January. This destocking trend is expected to continue into February. Domestically, both supply and demand are robust ahead of the holiday, supporting the destocking cycle for vegetable oils, which in turn supports spot prices and the March basis. However, contracts for delivery after May are weaker due to no anticipated supply shortages further out. Consider a bear spread for the May-September contracts. Rapeseed oil is catching up on declines, while soybean oil and palm oil remain firm. Strategically, vegetable oils are expected to fluctuate with a stronger bias; consider selling put options.
Eggs: Spot Prices Continue Rising, Breeding Profits Further Recover On Monday, egg futures declined, dragged down by weakness in related commodities, before entering a period of fluctuation and adjustment. By Thursday, market sentiment stabilized, leading to a rebound in egg futures, though prices pulled back again on Friday. Overall, egg futures maintained a consolidating pattern. As of the close on January 23, the main egg futures contract (2603) fell 0.85% for the week, settling at 3,046 yuan per 500 kilograms. This week, spot egg prices continued their upward trend. As of January 23, the daily average price for brown-shell eggs in China, according to Zhuochuang, was 3.85 yuan per jin, up 0.25 yuan from the previous week. Supported by pre-holiday stocking demand, traders' procurement enthusiasm increased, the pace of shipments from production areas accelerated, and supply from these areas decreased compared to earlier periods, leading to a further tightening of market supply and demand, which supported rising egg prices in production areas. However, as prices in production areas rose to high levels, downstream players became somewhat cautious about high-priced supplies. Overall consumption in sales areas was average this week; while costs increased for sales areas, the price increases there did not match the gains seen in production areas. Following the New Year holiday, spot egg prices continued to rebound, supported by demand. Influenced by the rising spot prices, breeding profits have continued to increase. As of January 22, Zhuochuang statistics showed a profit of 0.44 yuan per jin of eggs, indicating a sustained recovery in breeding profitability. However, increased profits are not conducive to effective reduction of production capacity. As of January 22, Zhuochuang sample data indicated the culling of 16.27 million older hens, with the number of culled hens declining for three consecutive weeks. Simultaneously, restocking has shown some recovery; as of January 22, the utilization rate of breeding eggs in Zhuochuang's sample points was 68%, increasing for three weeks in a row. If this trend persists, it will hinder the reduction of layer hen capacity, and supply-side pressures will continue to weigh on egg prices. Considering that the current rise in spot prices provides some support to futures in the near term, short-term trading is recommended. Monitor changes in culling and restocking意愿 among breeders for their impact on future supply, as well as the influence of capital flows and market sentiment on futures prices.
Corn: U.S. Corn Consolidates at Low Levels, Domestic Near-Month Contract Hits New High International Markets: At the beginning of the week, bargain-hunting buying pushed U.S. corn prices up by 1%, after which prices fluctuated. Following the January WASDE report, which led to a decline in U.S. corn, buying interest returned to the market. Export sales increased, cash market offers remained firm, processors raised their basis bids, and global buyers actively entered the market. U.S. wheat prices rose, primarily influenced by the strength in corn and ample global supplies. Signs of new export demand in the cash market triggered another round of short-covering. Expectations are for Russia's 2026 grain harvest to exceed the 2025 level, with snowfall in southern regions not causing damage to winter crops. Macroeconomic factors, including eased tensions between the U.S. and the EU regarding Greenland and a weaker U.S. dollar, provided support to commodity prices. Domestic Market: This week, the main domestic corn futures contract (2603) first fell then rose, with the March contract hitting a new high near the weekend. The May and July contracts followed suit, with forward prices returning to the highs seen in early December. In the spot market, with less than a month until the Spring Festival holiday, farmers are accelerating sales, and traders are actively purchasing, leading to increased trading activity in both production and sales regions. Currently, corn prices in Northeast China are generally stable; traders with inventory are selling based on prevailing market prices, and farmers at the grassroots level are also selling accordingly, with limited willingness to sell at low prices. Corn prices in sales regions are stable to firm. Supported by higher arrival costs due to snowfall in the north, trader offers remain firm. Downstream users are mainly cautious in their stocking, maintaining safe inventory levels with rolling replenishment, and no concentrated stocking wave has emerged. Technically, the recent performance of the corn market has been primarily influenced by movements in related commodities and market sentiment. The May corn futures contract weakened then strengthened, with rising purchase prices for high-moisture grain in production areas contributing to the price movement and a strengthening basis.
Hogs: Spot Hog Prices Continue Rising, Hog Futures See Profit-Taking Domestic hog prices rose initially then fell this week. As of January 22, the national average hog price was 12.82 yuan/kg, up 0.1 yuan/kg from the previous week. The price in the benchmark delivery region of Henan was 13.23 yuan/kg, an increase of 0.15 yuan/kg from the previous week. In the first half of the week, influenced by weekend cooling and snowfall, slaughterhouses temporarily increased procurement enthusiasm. Coupled with reduced supply from breeders who held back animals to support prices, hog prices continued to rise. However, as prices rebounded, end-user acceptance of high-priced pork cuts declined, demand decreased noticeably, and breeders became more willing to sell, leading the market back into a state of oversupply and causing prices to stop rising and fall back. According to Zhuochuang data, the average price for piglets on January 22 was 318 yuan/head, an increase of 59 yuan/head from the previous week. Breeding companies have rigid demand for restocking, but sourcing at low prices remains difficult. Furthermore, following the previous hog price rebound, breeders' willingness to restock has increased somewhat. On the other hand, the number of newborn piglets has declined, and major producers continue to fulfill contract obligations, leaving limited additional supply available for sale, supporting the continued rise in piglet prices. Data from the National Bureau of Statistics shows that at the end of 2025, the national hog inventory was 429.67 million head, an increase of 2.24 million head from the end of the previous year, up 0.5%. Within this, the inventory of breeding sows was 39.61 million head, a decrease of 1.16 million head, down 2.9%, representing 101.6% of the normal required level. For the full year of 2025, total hog slaughter reached 719.73 million head, an increase of 2.4% compared to the previous year. Hog slaughter volume maintained growth in 2025. As of January 22, the average slaughter weight for hogs in Zhuochuang's sample points was 124.5 kg/head, down 0.08 kg/head from the previous week. This week, average transaction weights varied by province, decreasing in the north and increasing in the south. In the north, breeding enterprises had generally oversold previously; as these hogs were gradually marketed and absorbed, the average slaughter weight declined. Influenced by the price rebound in the north, breeders in the south also held bullish expectations, with some actively holding back animals awaiting higher prices, while others followed the price increase but faced weak digestion, leading to widespread passive holding, resulting in increased average transaction weights in the south. Overall, however, the average hog transaction weight for the week decreased compared to the previous week. Customs data shows that pork imports in December 2025 were 60,000 metric tons, flat compared to the previous month. Zhuochuang data indicates that on January 22, 2026, profits for self-breeding self-fattening operations were 9.05 yuan/head, an increase of 10.31 yuan/head from the previous week. Profits for piglet fattening operations were -32.73 yuan/head, with losses narrowing by 12.98 yuan/head from the previous week. This week, although spot hog prices first rose then fell, they still showed a net increase compared to the previous week. Combined breeding costs for both self-breeding and piglet fattening operations decreased slightly week-on-week, while sales revenue increased and costs fell, leading to improved profits for both models. Currently, breeding operations are hovering around the break-even line. The operating rate at slaughterhouses declined week-on-week. Zhuochuang data shows that as of January 23, the operating rate at sample slaughter enterprises was 40.01%, down 1.92 percentage points from the previous week. With hog prices high this week, slaughterhouses faced significant procurement cost pressures. High hog prices also kept pork cut prices elevated, but market acceptance of these high-priced cuts continued to decline, leading to reduced orders for slaughterhouses and consequently lower slaughter volumes and operating rates. Overall, short-term demand support is limited, and breeders' willingness to market hogs will determine short-term price movements. From a medium to long-term perspective, overall production capacity remains on a downward trend. However, after the previous correction, futures prices have stabilized and rebounded. Maintaining a short-term trading approach is recommended, while paying attention to changes in capital flows and market sentiment.
Comments