In early June 2016, China's market price of soybean meal continues going up. According to CCM's price monitoring, during
the first week this month, the figure of 43% soybean meal averaged USD478.83/t
(RMB3,155/t), up 7% MoM.
Source: Baidu
Prior to this, in April, the market price
hit record low at USD379.29/t and rebounded by 17.9% MoM in May. This upturn is
mainly thanks to:
1. Rise in spot price of soybean
China relies heavily on imported soybean,
mainly from South America in recent period. According to China
Customs, in April 2016, 69.04% of the soybean was imported from this region. Recently,
the output in South America has been affected by the heavy rainfalls. Moreover,
it is said that Argentina's output of soybean was reduced and the quality also
lowered. For these reasons, the import price of soybean has gone up.
In the first week this month, soybean imported via Shandong Port was priced at
USD503.17/t (RMB3,493/t) on average, up 7.8% MoM, which supports the rise in
market price of soybean meal.
2. Soybean extracting enterprises raising
quotations
Many soybean extracting enterprises showed
slight falls in both operating rate and profit, due to the rising market price
of soybean (raw material). According to CCM's research, producers' average
operating rate decreased to 63%-66% during the first week in June (vs. 68%-71%
a week ago), and the theoretical gross loss reached USD3.04/t (RMB20/t). As a
result, producers raised their ex-works prices of soybean meal for better
profit.
So far, domestic auction for soybean for
temporary storage has not been launched yet. Additionally, given the on-going
embargo and closed distribution market, there is still a large gap in supply of
soybean. Meanwhile, as the financial performance won't get improved in a short
time, producers tend to maintain their quotations high. Thus, CCM predicts the
upturn in market price of soybean meal to continue in the short run.
Daily market price of soybean
meal in China, 3 May-6 June, 2016
Source: CCM
Import origins for soybean into China,
April 2016
Source: China Customs
The rising market price of soybean meal
will be favorable for lysine market.
As raw material for feed, compared with
corn, soybean meal contains more amino acids, especially lysine. Thus, feed
producers incline to substitute soybean meal for corn, so as to reduce the use
of lysine. Generally speaking, one tonne of soybean meal can replace 0.97 tonne
of corn + 0.03 tonne of lysine.
Yet, given the fact that the price of
soybean meal is higher than that of corn, the substitution ratio often varies
in line with the price gap for lower production costs. The larger this gap is,
the less soybean meal is used to replace corn and lysine. In other words, more
lysine is needed. According to CCM's price monitoring, in May 2016, the price
gap between soybean meal and corn reached USD166.6/t, the highest since 2015.
Monthly market price of lysine and price
gap between soybean meal & corn, Jan. 2014-May 2016
Source: CCM
This article comes from Amino Acids China E-News 1606, CCM
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