Oil and Oilseeds: Weather Concerns Drive Soybean No. 1 Higher

The oil and meal market experienced a mixed but firm tone this week, driven by a combination of factors including renewed volatility in the Middle East, a strengthening crude oil market, and intensifying El Ni帽o conditions. Both the August USDA supply and demand report and the July MPOB report exceeded expectations. The USDA report, as anticipated, lowered its forecast for US soybean yields, but surprisingly and significantly raised its estimate for harvested acreage, resulting in total production and ending stocks coming in above expectations. The MPOB report showed a larger-than-expected build-up in Malaysian palm oil inventories. Both reports ultimately followed a "sell the news" pattern, with prices rising after the data was released. The ample supply of oilseeds, coupled with spot market inventory pressure, is cooling the near-term outlook for the oil and oilseeds complex, and it will take time for this near-term dynamic to shift. The influence of weather on the oilseed market is expected to gradually diminish, but it is still intensifying in the oils market. Based on the strengthening expectations for an El Ni帽o event, drought conditions in palm oil-producing regions, especially Indonesia, are worsening, further reinforcing expectations of a future decline in palm oil production. India's vegetable oil imports rose in July, and the market is anticipating a restocking demand from the country. If this materializes, it will boost the vegetable oil market. The August USDA report projects that high global oilseed production will be absorbed by strong crushing activity, which is driven by both capacity expansion and support from biofuel policies. The realization of this crushing demand is a key focus for the market moving forward. Domestically, weather forecasts for northeastern soybean-producing regions call for heavy rainfall in mid-to-late August, raising concerns about crop yields. The market is pricing in a weather premium, leading to a strong performance for the No. 1 Soybean market. The supply of rapeseed oil is tight in the spot market, and stricter testing for genetically modified organisms (GMOs) in Russian rapeseed oil is reinforcing expectations of further supply constraints. The firm spot market for rapeseed oil is driving futures prices higher, and this trend is expected to persist until the spot supply situation improves. Protein meal supply and demand remain robust, while overall vegetable oil consumption is weak. As the end of August approaches, restocking demand is anticipated, which could lead to a firm, range-bound performance for the protein meal and vegetable oil sectors.

Eggs: Rising Demand Lifts Spot Prices Steadily

1. This week, the main egg futures contract (October 2610) showed a pattern of first pulling back and then rebounding. After a sustained rally last week, egg futures declined early this week. However, in the latter half of the week, supported by the continuous rise in spot prices, they rebounded again. By the close of trading on Friday, the main October 2610 egg contract had recorded a cumulative weekly decline of 0.15%, settling at 3,957 yuan per 500 kilograms.

2. Spot egg prices continued to rise this week. As of August 14, the average daily price of brown-shelled eggs in China, as tracked by Zhuochuang Information, was 4.86 yuan per jin, up 0.46 yuan per jin from the previous week. The culling of older hens has increased, tightening the supply of large-sized eggs in producing areas. This, combined with the gradual start of Mid-Autumn Festival stockpiling by food companies, has boosted procurement enthusiasm from downstream traders. Sales from producing areas have been consistently strong, and egg prices have risen steadily.

3. On the breeding side, the willingness to cull older laying hens is acceptable, and the volume of culled hens remains at a high level. On August 13, Zhuochuang's sample data showed a culling of 21.13 million old hens, representing a fifth consecutive week of month-on-month increase and reaching the highest level for the same period since 2021. Data on the age structure of the laying flock shows that in July, the proportion of hens awaiting culling was 10.08%, a month-on-month increase and the highest level for the same period since 2021. If the culling of older hens continues to increase in the future, it could partially offset the increase in newly productive layer stocks resulting from the higher chick placements in April and May. On the demand side, as temperatures gradually decrease, demand is recovering. With the start of the Mid-Autumn Festival stockpiling by food processing companies, the market is entering its peak seasonal demand period, which will support spot prices. Spot egg prices are likely to begin their seasonal bull run. The market will monitor the impact of demand changes on spot prices, and the futures market will focus on changes in market sentiment.

Corn: August USDA Report Lifts US Corn; Grains Show Strength Abroad, Weakness at Home

Overseas: In August, the USDA report was bullish, leading a rally in US corn, with wheat following suit. The report predicted lower supply and higher demand, pushing corn to a two-week high. This week, CBOT grains were generally weak early and then recovered, with trading centered around the August USDA supply and demand report. The market was in a wait-and-see mode early in the week. Rainfall in the US Midwest improved crop moisture conditions, reducing the weather premium, and corn, soybeans, and wheat all declined under pressure. Traders adjusted their positions in anticipation of the supply and demand data. The USDA report was released on Wednesday, lowering its yield estimates for corn and soybeans but raising its harvested area estimates, resulting in a slight upward revision for total new crop production. Wheat was under pressure from the ongoing winter wheat harvest, limiting its upside momentum. After the report's release, market interpretation was mixed. Corn bulls capitalized on the data to push prices significantly higher, while soybeans stabilized. Wheat's rebound was limited due to the pressure from the new crop supply. On the demand side, weekly US grain export sales slowed compared to the previous week, and the slower pace of overseas purchasing capped upside potential. Fund activity showed a pattern of reducing positions before the report and then rebuilding long positions afterward. As the new crop enters its critical growth period, changes in temperature and precipitation in producing regions will have a greater impact on prices. The market will continue to monitor weather, export inspection data, and production estimates.

Domestic: The domestic corn market continued its weak trend this week. As of August 13, the national average weekly corn price was 2,303 yuan per ton, down 13 yuan per ton, or 0.56%, from the previous week. By region, corn in the Northeast was weak. Although a slightly firmer trend in futures provided some support to sentiment, the market remained quiet due to limited downstream demand. Corn in North China stabilized and then rebounded. After a sustained price decline, traders became more reluctant to sell, and this, combined with the impact of rainfall, kept arrivals at deep-processing plants at low levels, prompting processors to shift from offering lower prices to raising bids. The corn market in the consuming regions of the South stabilized. Supported by the futures market, some offers were slightly increased, but trading remained limited to essential needs. Profitability in terminal livestock farming is poor, and downstream enterprises have not yet engaged in concentrated stockpiling. Overall, the August USDA report was bullish, with US corn leading a rally that lifted wheat. In the domestic market, ample substitutes for grains are available. The weighted corn contract is consolidating with a decline in open interest, and prices are expected to continue trading in a range, with a potential for a slight upward shift in the trading range.

Live Hogs: Spot Hog Prices Rise, Hog Futures Strengthen

1. This week, spot hog prices continued their upward trend. As of August 13, the national average hog price was 10.86 yuan per kilogram, up 0.5 yuan per kilogram from the previous week. In the benchmark delivery region of Henan, the hog price was 11.03 yuan per kilogram, up 0.7 yuan per kilogram from the previous week. On the supply side, farmers' willingness to send hogs to market was acceptable this week, with overall supply being adequate. However, the recent rebound in the enthusiasm for secondary piglet rearing and fattening has diverted some market-ready hogs, compressing the supply available for slaughterhouses. With stable demand for essential slaughtering, processors have found it increasingly difficult to procure hogs and have proactively raised their buying prices. Supported by this, transaction prices for live hogs across various regions have risen consecutively.

2. This week, piglet prices declined month-on-month. As of August 13, the average piglet price was 186 yuan per head, down 46 yuan per head from the previous week. On the supply side, sow farms are proceeding with their normal sales plans, and piglet supply is stable. On the demand side, piglets currently being purchased for rearing are unlikely to reach a heavier-than-normal slaughter weight before the Chinese New Year, leading to a gradual decline in downstream buying interest, which has pushed piglet prices lower.

3. In July 2026, Zhuochuang's sample data showed that sample farms culled 232,539 breeding sows, a month-on-month increase of 2.35%. The sales of replacement gilts were 10,750 head, a month-on-month increase of 10.25%. Both culling and new additions increased month-on-month, but the growth in culling was smaller than the growth in gilt sales.

4. This week, the average slaughter weight of hogs continued to increase compared to the previous week. As of August 13, Zhuochuang's sample data showed the average slaughter weight was 124.38 kilograms per head, an increase of 0.27 kilograms per head from the previous week. The price spread between heavier and standard-weight hogs continues to widen. Farmers are generally not eager to send hogs to market and are opting to hold back for heavier weights. Additionally, with the temperature drop after the "Start of Autumn" (Liqiu) solar term, the rate of weight gain in hogs is accelerating, leading to a continued rise in slaughter weights.

5. Data from the General Administration of Customs shows that in June 2026, China imported 70,000 tons of pork, unchanged from the previous month.

6. Zhuochuang data shows that as of August 13, the profit for self-breeding and self-fattening operations was -151 yuan per head, with the loss narrowing by 62 yuan per head from the previous week. The profit for rearing purchased piglets was -196 yuan per head, with the loss narrowing by 63 yuan per head from the previous week. This week, many regions were affected by typhoon-related rainfall, hindering the movement and transport of live hogs. Furthermore, the price of heavier hogs remained relatively high, encouraging farmers to hold back for weight gain, which supported the price rise by reducing supply. At the same time, overall production costs decreased. The combination of increased sales revenue and lower costs led to an improvement in farming profits, reflected in the narrowing of losses.

7. The slaughterhouse operating rate fluctuated this week. Zhuochuang data shows that as of August 13, the operating rate of sample slaughterhouses was 34.96%, down 0.13 percentage points from the previous week. Live hog supply is adequate. As temperatures fall and some areas are affected by rainfall, downstream demand for advance stockpiling has increased, leading to a slight increase in orders for slaughterhouses. However, in the short term, the strong sentiment among farmers to hold back for weight gain limits market supply, resulting in a slight decline in the operating rate.

8. In the futures market, terminal demand has improved slightly after the "Start of Autumn" (Liqiu) solar term, providing some support to spot hog prices. Additionally, the increased willingness of farmers to hold back for weight gain also supports short-term hog prices. Spot hog prices have continued to rebound, forming a linked upward trend with futures prices. Looking at the medium to long term, the number of newborn piglets in March decreased year-on-year, and the number from April to June continued to decline month-on-month. The improvement in hog supply in the third quarter, combined with peak demand during the Mid-Autumn Festival, National Day holiday, and the end-of-year season, suggests a potential for a modest rebound in hog prices.