The first half of this year saw the domestic commodity market “set the record” of extensive increases. The causes and sustainability for this round of rebounds in the agricultural products drew the attention of the attendees at the “China International Cereals and Oils Industry Summit 2016” recently held in Chengdu. According to the market analysts, on one hand, the consumption demands for soybean meal and other products increased significantly, the bad weather conditions resulted in the reduced productions of soybean worldwide, and the gaps in supplies pushed up the prices of cereals and oils; on the other hand, the domestic currency was flowing from the virtual economy to the real economy, and the real economy showed signs of recovery, which was also one of the causes.
Li Yanchuan, deputy chief of the hedging department of COFCO, said that this year China’s consumptions of soybean meal will grow by 9% which is more than expected. Firstly, the productions of rape seed and cotton seed will decrease this year, and such gaps of protein need to be supplemented by soybean meal; secondly, with adjusted state policies, China’s imports of DDGS decreased by one million tons last year, and the reduced protein also needs to be supplemented by soybean meal; thirdly, currently the profit margins of breeding are high. According to the semiannual reports of some listed breeding enterprises, the profits of the enterprises in the first half of this year are about three times those of the same period of last year, which will increase the proportion of the soybean meal in the feed. It is also an important reason for the growth of the demand for soybean meal.
In the face of strong growth in domestic demand for soybean meal, the frequent severe weather conditions this year have caused hidden worries to the soybean production worldwide. According to the statistics of the “Oil World”, the rarely seen floods in April made Argentina abandon the soybean producing areas with 2 million tons of yields and at the end of June the soybean inventories shrank by 4.2 million tons. The drought in Brazil resulted in a decrease of 9.2 million tons in its soybean inventories at the end of May. It is expected that in the second half of this year the soybean exports from South America will decline by 8 to 9 million tons. The gaps in supply have pushed up the prices of soybean, soybean meal and other products at home and abroad.
In addition to the industrial fundamentals, Li Zhao, director of Yongan Futures, said that since last October the growth rate of M1 has been higher than that of M2, showing the reversed scissors difference. It means that the domestic funds have begun to flow from the virtual economy to the real economy, that is, the people’s funds flow out of the virtual financial and trust products to the real economy and transform into the deposits of enterprises.