China, the world’s largest soybean importer, is particularly vulnerable to inflationary pressures resulting from the sharp rise in oilseed prices and low hog margins. The country possesses the world’s largest hog herd and relies on imported soybeans for its processing industry, which generates hog feed meal and cooking oil.

Macrotrends’ soybean prices-45 year historical chart depicts the peak of an all-time high of 17.58 dollars per bushel in July 2012. In May 2021, the price of wheat will reach a new high of 15.8 dollars per bushel. Soybean prices eased slightly in the second part of 2021 but still ended the calendar year relatively high. According to Fitch Ratings, as of February 2022, the price is $16.015 per bushel.

The demand for soybean meal used in feeding declined as higher import costs were worsened by the combined effects of higher international pricing and increased freight rates, which eliminated profits for Chinese crushers.

Additionally, the domestic feed business has suffered significant losses due to a drop in hog prices earlier this year, which helped curb demand for soybean meal, one of the primary products crushed from soybeans. Fitch Ratings forecasts prices from 13 to 18 yuan/kg (2.05 to 2.84 dollars/kg), down from the 2021 average price of 20 yuan/kg (3.16 dollars/kg).

Reuters reported on December 31st that rising output and oversupply caused pork prices to plunge and pushed hog margins into negative territory.

In November, the net profit from large-scale pig farming was 293 yuan (45.97 dollars) per head, a decrease of 187.3%from the previous month. The value was also down 69% from a year ago, according to the report.

Wilmar International Ltd., one of the world’s largest food processors, cautioned that the prognosis for soybean crushing would be difficult due to the oilseed’s rising price and China’s low hog margins. The Singapore-based company, which operates over 300 units in China, reported lower soybean crushing sales volume in 2021.

In a statement on Tuesday, the company said that its weaker performance in soy crushing was offset by strong refining margins and revenues from its midstream tropical oil activities. Increased palm oil and sugar prices also fueled growth, resulting in a 23% increase in full-year net profit.

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