With the outbreak of the Russian-Ukrainian war, soybean spot and futures ushered in a sharp rise, because Russia and Ukraine are important exporters of agricultural products and energy in the world, at present, the international palm oil price has hit a record high, while the price of soybeans, wheat and other prices hit a new high in 10 years. The domestic soybean oil soybean meal, which has soared by 24% in the past two months, has made many domestic oil mills stop their factories, and many industries such as aquaculture and catering have been under pressure, and they have consumed a high amount of foreign exchange.
There is no doubt that soybeans and other grains, like chips, have become an important chip in the game of great powers, but also become a bottleneck stuck in China's development neck, in order to reduce foreign dependence, since the end of last year, Chinese officials have repeatedly stressed that "to improve the production of soybeans and other oil crops as a major political task that must be completed in 2022." Therefore, how long can soybeans go crazy, and the fate of iron ore can be used as a reference.
1
The beans are soaring, like the iron ore of the year
Since the launch of the new season soybeans this year, the price has been rising, refreshing the new highs in nearly 10 years. At present, the average price of soybeans is close to 5500 yuan / ton, an increase of more than 50% compared with 2019. The price of third-class domestic soybeans in Heihe, Heilongjiang, is close to 6,000 yuan / ton, and the price of imported soybeans in Shandong is as high as 4700 yuan / ton.
After the decline in the profit of domestic oil mill crushing and the general loss, which seriously affected the interest of domestic buyers in purchasing soybeans, many buyers chose to cancel the purchase contract, offset the losses generated by the crushing after the purchase with default costs, reduced the operating rate after the shortage of soybean inventory in oil mills, and many oil mills have been shut down or planned to stop due to lack of soybean source crushing, which has exacerbated the market's supply concerns in recent months.
According to Mysteel Agricultural Products' survey of the country's major oil mills, a total of 31 oil mills in 9 regions have long-term shutdown plans from February to March, of which Shandong has the most planned shutdown oil plants, with a total of 6 oil mills shutting down; oil mills in East China, Guangdong and Fujian have a long downtime, basically about 30 days. Such fundamentals are cashed out for spot tightness, and in recent months, the basis of soybean meal in East China has reached 05+460, and the 35 price spread of soybean meal has risen sharply to about 400.
This is similar to the iron ore surge more than a year ago, which forced the steel mill to stop work, He Cheng.
The continent is the world's largest producer and consumer of steel. In 2020, the surge in iron ore has also reduced steel mills to "workers", so that steel mills have huddled together to ask for government intervention. On the afternoon of December 10, 2020, the Iron and Steel Association organized China Baowu, Shagang, Angang, Shougang, Hesteel, Valin Steel and Jianlong and other steel companies to hold an iron ore market symposium to discuss the recent market operation and other issues.
The participating enterprises agreed that the current rise in iron ore prices has deviated from the fundamentals of supply and demand, significantly exceeding the expectations of steel mills, and the signs of capital speculation are obvious. At present, the pricing mechanism of the iron ore market has failed, and steel companies have unanimously called on the State Administration of Market Supervision and the Securities Regulatory Commission to take effective measures to intervene in the investigation in a timely manner and severely crack down on possible violations of laws and regulations in accordance with the law.
The war between Russia and Ukraine has nothing to do with the mainland, but the mainland is facing a huge potential impact. Russia and Ukraine account for 25% of the global wheat and barley trade, 20% of global corn sales, and 80% of global sunflower oil exports. The escalation of the situation in Russia and Ukraine is driving further tensions in the supply situation.
2
Food security, the rice bowl of 1.4 billion people
Compared with the chips and operating systems that are restricted in the mainland technology industry, food is more closely related to our daily lives. The mainland is the world's major consumer of soybeans, soybean consumption has risen steadily, in 2017 the mainland soybean consumption exceeded 110 million tons, ranking first in the world. Mainland residents have increasingly high requirements for physical fitness and health, and they need high-quality soybeans, pork, and oil to ensure our health.
Professor Luo Yunbo of the College of Food Science and Nutritional Engineering of China Agricultural University once pointed out in a speech in 2019: "In the Sino-US trade war, we wanted to use soybeans as a "weapon" to restrain the United States, but this would lift a stone and drop it on our own feet, because our needs are too big." Without importing U.S. soybeans, the world's soybeans will not be able to meet the needs of mainland consumption, and we will not have our own supply of soybeans of the same quality and cost. In addition, if there is a problem with the supply of soybeans, there will be a shortage of feed made of soy protein, and the supply of pork will also be a problem.
Although the mainland soybean production has been greatly improved in recent years, the strong domestic consumer demand has made the mainland soybean import volume continue to increase, and the dependence on soybean imports is still high. China's soybean imports in 2020 reached 100.33 million tons, an increase of 11.7413 million tons over 2019, and China's soybean imports from January to November 2021 were 150.977 million tons. China's soybean imports in 2020 amounted to US$39.52 billion, up 11.8% year-on-year. Among them, China bought 25.89 million tons of soybeans from the United States, an increase of 52.8% year-on-year.
The current rise in U.S. soybean prices to rare highs means that import costs will continue to rise sharply, posing a key challenge to mainland agriculture. At present, the status of agriculture as a "ballast stone" in national development and the role of strategic chips in the great power game are becoming increasingly prominent, and the independent and controllable seed sources of important grains such as soybeans need to be solved urgently.
3
Break the situation with an iron fist and make up for the shortcomings of the great power game
Iron ore can soar by compressing steel capacity; but it cannot reduce demand by compressing production capacity. Therefore, food security such as soybeans is more urgent.
Since the end of last year, officials have repeatedly made statements and taken various measures to break the situation.
The National Meeting of Directors of Agriculture and Rural Affairs on December 27, 2021 stressed the need to increase the production of soybeans and other oil crops as a major political task that must be completed in 2022.
On February 16, 2022, Chinese state media quoted Officials from the Ministry of Agriculture as saying that by replacing feed soybean meal, China could reduce soybean import demand by 30 million tons. The trade war since 2018 and the COVID-19 pandemic since 2020 have highlighted geopolitical risks and bottlenecks in global supply chains, prompting China's policy to shift towards higher domestic oilseed production and lower import dependence.
At a press conference held by the State Council Information Office on February 23, 2022, responsible officials said that at present, domestic soybeans can meet the demand for edible consumption. Imported soybeans are mainly used for edible vegetable oil and livestock feed proteins. In the next step, we must make good use of the two domestic and international markets and two kinds of resources to increase the supply of soybean oil, but on the other hand, it is more important to base ourselves on ourselves, make great efforts to adjust structural problems, and make great determination to expand the production of soybeans and oilseeds. Fill the "oil bottle" with as much Chinese oil as possible.
There are rumors that China Grain Storage will release up to 5 million tons of soybean reserves to meet demand from March to May, and if the news is true, it will temporarily alleviate the tight supply of soybeans in China.
4
Expect to cool down, the invisible hand is powerful geometrically
Given that soybean pricing power is not in China, many views are deeply skeptical about whether China's "policy hand" can achieve the desired effect.
It should be known that in July 2021, in the face of the high price of iron ore, in addition to the regulatory actions of the National Development and Reform Commission and the State Administration of Market Regulation, the Dalian Commodity Exchange and the China Iron and Steel Association have also spoken out and taken relevant measures, such as adjusting contract fees and carrying out market monitoring, etc., which can also be seen that the determination and intensity of national administrative supervision are very large. The effect was also immediate, iron ore began a 4-month long winter, the price rolled from 1300 yuan / ton all the way to 500 yuan / ton.
For soaring soybeans, the government has also begun to multi-pronged. Dashang issued a notice that from the settlement time of February 25, 2022 (Friday), the margin level of speculative trading in palm oil futures 2204 and 2205 contracts will be adjusted from 10% to 12%, the margin level of up-down stop-and-go board and hedging trading will remain unchanged at 8%, the margin level of speculative trading of soybean oil futures 2205 contract will be adjusted from 8% to 9%, and the margin level of up-down stop-up and hedging trading will remain unchanged at 7%.
In addition, the state is also actively expanding production capacity, such as actively restoring the soybean area in the northeast region, actively promoting soybean corn strip compound planting, and actively developing oil production to expand production capacity, after 5-10 years of efforts, strive for a large increase in the self-sufficiency rate of soybeans and oilseeds.
For the domestic pulse price, the policy's regulation and control policy will also see tricks, and the invisible hand of the government cannot be underestimated.