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05

2020

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07

Domestic soybean "ride the wind and waves" behind: the price rose 26% in half a year processing enterprises face the speed of life and death

"This is no longer simply a rally, but a 'rocket ride'." Chen Yonghua, deputy general manager of Jimusi Dongmei Soybean Food Co., LTD., said, "For grain, fluctuations that may rise by tens of yuan are normal, but as soon as soybeans rise, they rise by 1,000 yuan to 1,500 yuan (per ton) (from the beginning of March to the end of May), which is already a very abnormal growth.


"This is no longer simply a rally, but a 'rocket ride'." Chen Yonghua, deputy general manager of Jimusi Dongmei Soybean Food Co., LTD., said, "For grain, fluctuations that may rise by tens of yuan are normal, but as soon as soybeans rise, they rise by 1,000 yuan to 1,500 yuan (per ton) (from the beginning of March to the end of May), which is already a very abnormal growth.

Commodity futures to hand over the first half of the "report card". According to Wind data, in the first half of this year, in addition to the liquefied petroleum gas futures listed on March 30 recorded a 51% increase, the domestic soybean as the target of Douyi futures performance in the first half of the year, the price rose 26%, higher than the third and fourth gold, iron ore (up 15% in the first half of the year) 10 percentage points.

Last year, soybean production was reduced, surplus grain was not sufficient, and the gap between supply and demand widened, which was the driving force behind the price rise of domestic soybeans. The spot price of soybeans also showed a rise of varying amplitude. According to Zhuo Chuang Information statistics, in 2019/20, the price of domestic soybeans continued to rise, and after 2020, the increase will expand. In Huaibei, Anhui Province, for example, the net trucking price of soybeans increased from 4,540 yuan/ton in early January 2020 to 5,900 yuan/ton at the end of June, an increase of 1,360 yuan/ton or 29.95%. In addition, according to Wind data, Jiamusi area third-class domestic soybean spot prices rose as high as 42.24% in the first half of this year.

At present, the soybean market is still not "cooling" trend.

Since June 12, the national reserve soybeans, known as "reservoir" and "regulator", have been auctioned. By July 2, there have been four rounds of auctions, all of which have been sold and the premium is higher than one round. The soybean market is still hot. On July 3, the main soya-1 futures contract in 2009 reached as high as 4,933 yuan per ton, close to the nearly eight-year high set on March 31.

In the view of the industry, the state reserve soybean "trickle" type of release, not enough to alleviate the current market "hunger". In the new season of soybean supply and demand balance before the arrival of the price range, soybean deep processing companies have no choice but to absorb the high cost, struggling to survive.

Imbalance between supply and demand

At present, there are two soybean futures varieties listed on the Dalian Futures Exchange: Soybean No. 1 (Dou 1) and soybean No. 2 (Dou 2). Dou-1 corresponds to non-GMO soybeans that meet delivery criteria. The second contract of Soybean, based on the national standard of oil soybeans and with crude fat content as the core, adopts the index system of oil pressing soybeans, including transgenic and non-transgenic soybeans from all over the world that meet the delivery standard.

At present, China ranks fourth in the world in soybean production and first in both soybean consumption and import volume. China imported 82.5 million tons of soybeans in 2018/19, accounting for 80.9 percent of domestic consumption in that year, according to a forecast report by Zhiyan Consulting. Data from the General Administration of Customs showed that China imported 33.88 million tons of soybeans from January to May, up 6.8% year on year, of which 9.38 million tons of soybeans were imported in May, up 27.7% from the same period last year.

The production of domestic soybeans (non-GMO soybeans) is limited, for example, only about 16 million tons in 2019/20, which is far from enough to meet its consumption. In recent years, more than 80% of China's soybean consumption (edible beans, soybean meal and soybean oil) is imported soybeans (among which the proportion of non-GMO soybeans is expected to be less than 10%). In addition, due to special protection measures in Chinese food field, domestic non-GMO soybeans are mainly used for eating, while imported GMO soybeans are mainly used for crushing soybean meal and soybean oil, which have different properties. Imported transgenic soybeans have very little effect on the price of domestic soybeans, and can not make up the gap of domestic soybeans.

"This is no longer simply a rally, but a 'rocket ride'." Chen Yonghua, deputy general manager of Jimusi Dongmei Soybean Food Co., LTD., told the Economic Observer, "For grain, fluctuations that may rise by tens of yuan are normal, but as soon as soybeans rise, they rise by 1,000 yuan to 1,500 yuan (per ton) (from early March to the end of May), which is already a very abnormal growth. It's devastating for our companies that use soybeans as a raw material."

In Chen Yonghua's opinion, the main reason for the soybean price rise in the first half of the year is that the main soybean producing areas in Heilongjiang Province were hit by the disaster last year. The harvest only reached 60% of the previous year, and the output decreased significantly. In addition, the expectation that imports would be affected by the trade environment triggered a rush to buy soybeans in the first half of this year.

According to Chen Yonghua, domestic grain deep processing enterprises are basically using non-GMO as raw materials, while the press (oil extraction) and feed processing mostly use GMO soybeans as raw materials. Domestic soybean production only accounts for about 15%-20% of domestic consumption, and 80% is imported. "Since the grain processing area is basically non-GMO soybeans, Heilongjiang Sanjiang Plain is a major producing area for domestic soybeans, and the phenomenon of soybean buying is more intense."

Tang Qijun, deputy general manager of Nanhua Futures, vice president of China Soybean Industry Association and president of Heilongjiang Soybean Association, said in an interview with the Economic Observer that the price of domestic soybeans rose from 1.7 yuan per jin to 2.7 yuan per jin in the first half of this year, which is the highest increase in nearly eight years.

Investigate the reason, Tang Qijun thinks this is mainly caused by the imbalance between supply and demand.

According to reports, in 2019, due to the continuous low temperature, low light and rainy soybean growing season in Heilongjiang producing areas, the soybean yield per unit area declined significantly, and the grain quality was poor, farmers' enthusiasm for selling grain was high, and the surplus grain at the grass-roots level basically reached the bottom before the Spring Festival. After the Spring Festival, the worldwide outbreak of the novel coronavirus pneumonia (COVID-19) led to import obstacles and a gap between supply and demand in the domestic soybean market, which supported the continuous rise of spot prices. In addition to the continuous increase in the price of grain storage acquisition, the market price played a further consolidating role. Later, with the improvement of the epidemic, downstream demand began to recover, and the gap between supply and demand in the domestic soybean market further widened, which pushed up the price and ushered in a "highlight moment" for the domestic soybean price.

An grain futures analyst Gong Yue believes that the logic behind the surge in soybean futures and spot prices lies in three aspects.

It is reported that the new rules of soybean futures delivery began to execute in 2005 contract, yellow soybean delivery quality standards more detailed, improve the requirements for soybean delivery products. Gong Yue said that due to the addition of some new indicators and quantitative indicators, the market on the implementation of the new rules or doubts, plus 2019 soybean quality rate is low, 2005 deliverable warehouse receipts are less, more recent prices, driving the price of far months.

On the other hand, it benefits from the soybean market production is not as tight as needed. Gong Yue introduced that, due to the weather, in 2019 Heilongjiang and other major soybean producing areas yield per mu decline is more serious, the yield reduction is 20%-25%, and the quality is not high, farmers sell grain actively, before the Spring Festival, the surplus grain basically used up. High quality soybean quantity is small price firm, basic surplus grain supply shortage to spot prices constitute strong support. The soybean supply in the selling area is tight and there is a rigid need to support, traders are mostly used for inventory consumption, reluctant to sell psychology is strong. And because of the high price of soybean auction, the purchase cost of traders increases.

In addition, Gong Yue believes that the price of bean futures and capital squeeze boost, high positions, low warehouse orders, low inventory superposition, for long squeeze provides favorable conditions.

Diversion inlet

From June 12 this year, the State Reserve soybeans began to be auctioned. By July 2, there were four auctions, all of which were sold and the premium was higher than one round. From the highest transaction price of 5270 yuan/ton at the first auction to 5570 yuan/ton at the fourth auction, the highest price rose by 300 yuan/ton.

It is reported that the purchase and sale of soybeans will be organized by China Grain Reserve Management Corporation in accordance with the central grain reserve plan. The central grain reserve is subject to a balanced rotation system, and the annual rotation is generally 20 to 30 percent of the central grain reserve. The national soybean reserve is mainly used to regulate the national soybean supply and demand, stabilize the soybean market, and cope with major natural disasters or other emergencies.

Tang Qijun said that the recent weekly soybean auction in the amount of 30,000 to 60,000 tons, due to the small amount of investment, basically can not effectively alleviate the tight supply and demand pattern. Things to rare for expensive, market participation enthusiasm, resulting in a higher transaction premium. Instead of cooling the market, spot soybean prices rose as auctions continued. He believes that this kind of hungry auction is unique to this year, because through last year's auction, the temporary stock of soybeans has been exhausted, the soybean released in the early part of this year is the national one-time reserve, according to the current situation is only 188,000 tons of one-time national reserve of soybeans. Later, it will replenish the market by releasing soybeans from local reserves. As a whole, this small number of "long flow of water" auction form and the current national soybean reserves have a certain relationship.

Domestic soybean prices rise sharply, for traders, to buy and sell non-GMO imported soybeans is a good choice. After strengthening commodity inspection at ports in recent years, some non-GMO soybean imports from Russia, Canada and Ukraine have increased significantly, but the total amount is still low.

It was publicly reported in early March that Shanghai Customs received an entry quarantine permit application from a Shanghai food company for 2,000 tons of Russian non-GMO soybeans, which were mainly used as food raw materials to ensure the supply of soybean products in the Shanghai market during the epidemic.

Gong Yue said that in the first half of this year, the price of domestic soybeans was at a high level, and some traders and small workshops turned to the purchase and sale of non-GMO imported soybeans, but after all, the import volume was limited, and the price of domestic soybeans could not be significantly inhibited.

An agricultural trader told the Economic Observer that, faced with a domestic shortage of non-GMo soybeans, it is not impossible for them to consider going into the business if it is profitable. However, since the import volume is basically 5,000 tons or 10,000 tons, the price risk and import inspection risk are too great for small traders without distribution channels. "Maybe some big traders or big food processors will import, but for small traders like us, there is no need to take such a big risk."

Tang Qijun said that in the structure of China's imported soybeans, mainly genetically modified soybeans from North and South America, accounting for more than 90% of the total imports, only Russia, Ukraine and other countries supply non-genetically modified soybeans, and the number is very limited. For traders, imported Russian beans do have a certain price advantage over domestic soybeans. However, due to the COVID-19 epidemic this year, Russia's soybean exports are hampered by logistics, inspection and quarantine problems, and its domestic soybean supply is also relatively tight, so from the end of April to the present, the quantity of imported Russian beans to the port is very small. Overall, imported Russian beans have limited impact on Chinese soybean price.

Survival pressure

The first half of the year has not been easy for companies that use soybeans as the main raw material for their products. Especially for some soybean deep processing enterprises, soybean raw materials account for a high proportion of production cost, which has a significant impact on the company's gross profit rate and profitability. Its price fluctuations also directly affect the company's benefits.

Chen Yonghua told reporters that the market sales decline superimposed raw material costs rise, optimistic, the first half of this year compared to the same period last year is expected to compress 60% to 70%.

Under high soybean prices, how to maintain normal operation and control costs? "The market itself is sluggish this year, product demand has decreased, raising the price is bound to affect sales more, can only be slightly (higher)." Chen Yonghua said the rising cost of soybean raw materials can only be digested internally. In addition, the company also from the channel competition, market development to find a breakthrough, as far as possible to improve the company's benefits and the ability to adapt to the harsh environment.

In the process of the rapid rise of soybean prices, not only the price is high, some areas are also in a state of high stock. Reporters learned that Nenjiang County, Heilongjiang Province, some small non-GMo soybean oil pressing companies have been closed. "(Soybean) raw materials are not enough, more than 5,000 a ton of price is too high, boring, equal to dry, wait for the end of the year to produce it." Says a press company official.

Fortunately for Chen Yonghua, when there were early warnings of soybean price fluctuations, they made grain reserve in advance, and also made reservations with soybean suppliers they had cooperated with before. "So now there is no problem for the company to be 'self-sufficient' in soybeans." He further admitted that "high-quality soybeans like the one we [use] would not be available at such a high price if they had not been pre-stored."

Dongmei is not the only company to stock up in advance. Xiamen Yinxiang Bean Products Co., Ltd. related person told reporters that the company began to stock up around May, then worried that the price will rise again, so first stock up a batch (soybeans).

For large soy companies, the impact of higher soybean prices has been less pronounced. A person in charge of a large soybean product enterprise in Zhejiang told the reporter that the outbreak of COVID-19 in the first half of this year hindered the import of soybeans, coupled with the decline of domestic soybean production in 2019 caused the imbalance of domestic soybean supply and demand, which caused the rise of domestic soybean prices, leading to a certain rise in the price of soybean raw materials of the company, but due to the increase in the demand for soybean products caused by the epidemic. Operating results were not adversely affected by higher soybean costs.

wait

Soybean auction continues to be hot, when can domestic soybean prices cool down? "Until domestic soybean supply recovers, spot and futures prices may remain high." Gong Yue predicted that the second half of the domestic soybean price trend after the first rise. In the short and medium term, there is very little surplus grain at the basic level, traders have difficulty in quantity and the acquisition cost continues to increase. It is still about 4 months before the new beans are listed in most producing areas, the surplus grain supply in producing areas is increasingly tight, traders have strong sentiment of price support, and the limited quantity of policy soybeans is not enough to alleviate the current supply shortage. It is expected that domestic soybeans may still increase in the short and medium term.

However, Gong Yue said that considering the limited enthusiasm of downstream procurement, it is still mainly used on demand. At the same time, the current price of domestic soybeans is too high, some small workshops choose to import transgenic soybeans as an alternative. It is also said that 600,000 tons of soybeans are expected to be auctioned before the new beans are released in 2020. Coupled with the upcoming market of early beans in the Lianghu region in July, a large increase in the planting area of new beans and the liberalization of soybean imports from Russia in the later stage, the tight domestic soybean supply situation may be eased. Therefore, it believes that it is still necessary to pay close attention to the auction situation of state reserves, market demand and the arrival of soybeans in Hong Kong.

Tang Qijun said the current domestic soybean prices will be more dominated by supply and demand. From the soybean market in the first half of this year, the imbalance of supply and demand for price support is obvious. For the new season soybean prices, he believes, or a high correction trend. One of the reasons is that the soybean planting area in Heilongjiang Province, the main producing area this year, has increased significantly, leading to the increase of soybean planting area in the whole country. Second, due to the impact of the epidemic, local consumption has declined to varying degrees and demand has weakened. Third, with the release of new season soybeans, the tight supply and demand structure in the first half of the year may improve. Therefore, as a whole, the new season soybean market, the price will be under pressure.

Chen Yonghua with more than ten years of experience in the industry believes that the second half of the soybean price will fall, if not in the shadow of natural disasters