Latest news on the 2019 El Niño phenomenon shows rising prices for Chinese agricultural products and fruit
Under the onslaught of consecutive heavy rains in the south, flooding in Hubei, Anhui and other places has worsened. Industry insiders say the heavy rainfall has caused considerable losses to the planting and breeding industries in the Hubei and Anhui areas. On the one hand, floods have blocked transportation; on the other hand, the risk of epidemics has increased. It is expected that for some time to come, driven by the floods, the prices of pigs and some other agricultural products will continue to rise.
Since the start of this year, extreme weather has struck around the world, and weather-related speculation has frequently appeared in the agricultural futures market. According to the latest report published by the commodity data provider Sci99, in the first half of 2016 the agricultural by-product index went through a two-month dormant period before surging dramatically. Among them, the feed sector performed most strikingly, with meal products rising across the board, and both soybean meal and rapeseed meal up by more than 20%. Yesterday, because agricultural product prices had risen too quickly, some varieties such as rapeseed meal and soybean meal began to pull back. Industry insiders predict that although agricultural product prices may pull back in the short term, rising prices will still be the main theme going forward.
Floods hit the planting and breeding industries
A "mini bull market" in agricultural products has already appeared, but weather disasters are still raging. According to statistics from relevant institutions, as of July 3, 1,192 counties in 26 provinces, autonomous regions and municipalities across the country had been hit by floods, with 2,942 thousand hectares of crops affected and direct losses of about 506 hundred million yuan.
According to the latest research by the well-known domestic agricultural product data provider Zhihua Data, this round of rainfall came with fierce force, with flooding breaking out in many places in Hubei and Anhui provinces, many pig farms submerged and most fish ponds washed away, causing losses to farmers that are difficult to estimate. Some farmers in Hubei and Anhui reported that because the rainstorms came with such force, the pig farms flooded severely, and the young piglets, with low resistance, drowned as soon as they met the water.
"Because transportation has been blocked, the shipment of fattened pigs out of the disaster-stricken areas of Hubei and Anhui is currently restricted, and the supply of fattened pigs in some markets in central and eastern China may be insufficient. After the disaster, pigs will be sent to market in a concentrated way, and the fattened pigs sent to market are heavier in weight, so the quality of the pigs varies greatly." said Yao Guiling, a researcher at Zhihua Data. Fattened pigs soaked by floodwater are very prone to illness and even death. In addition, with the current humid air and suitable temperatures, pathogens can easily survive by relying on water sources and air, making it very easy to cause infection and spread of disease. This flood disaster will be bearish for pig prices in the short term and bullish for pig prices in the medium and long term.
According to her introduction, in Huanggang and Xishui in Hubei, this flood disaster caused severe damage to the road traffic heading to Huangshi and Wuhan. Of the farms and households near lakes and rivers, 70-80% were submerged or washed away, while 30% of those farther from rivers and lakes were submerged. Most farmers chose to send their fattened pigs to market around the Dragon Boat Festival. At present, there are no pigs of suitable weight in the pig houses to send to market, and most will be sent to market at the end of July and in August. Affected by the damaged transportation and the off-season for purchasing, few people are buying pigs at present.
Agricultural product prices under short-term pressure
Recently, affected by weather factors, investment enthusiasm in the domestic agricultural product market has heated up, and prices have also risen rapidly, especially soybean meal and rapeseed meal. Wang Xianjun, a researcher at Yingda Futures, said that there are currently two main factors affecting soybean meal prices: first, the number of live pigs on hand, and second, expectations for the output of U.S. soybeans and South American soybeans.
According to data from the Ministry of Agriculture, in April the number of live pigs on hand increased by 0.6% month on month, and the number of breeding sows on hand increased by 0.3% month on month. However, pork prices continued to rise and broke through 20 yuan/kg, and the impact of farmers' active restocking behavior will also begin to show in the second half of the year.
Industry insiders say that affected by the recent severe rainfall in the south, China's soybean output is bound to decline somewhat. Relevant data show that as of July 1, soybean inventories at domestic ports stood at 6.50534 million tonnes, which will lead China's demand for soybeans in the second half of the year to rely on foreign imports, and this is bound to worsen the situation of supply falling short of demand in the soybean market. "Pig prices lag behind soybean meal prices, so the supporting effect of farmers' restocking behavior on soybean meal prices will begin to show in the second half of the year," Wang Xianjun said.
In fact, this is not only the case domestically. Expectations of the impact of the La Niña climate continue to heat up in the global market. According to a forecast by the U.S. Climate Prediction Center (CPC), La Niña weather will have an adverse impact on soybean growth in the United States and South America, and a reduction in soybean output is already inevitable. Industry insiders say that soybean meal prices are currently at historic highs, and it is necessary to guard against the adjustment risk brought by the rapid rise.