China’s soybean meal futures fell on Thursday, snapping a five-day rally after authorities pledged to rein in hog production and reduce soymeal use in animal feed to stabilise hog prices.

The most-active soybean meal contract on the Dalian Commodity Exchange (DSMcv1) fell 2.26% to 3,026 yuan per metric ton as of 6:55 GMT, marking its steepest daily drop since Nov last year.

At a Wednesday meeting with major hog producers, the Ministry of Agriculture and Rural Affairs (MARA) said the country would reduce the number of breeding sows, control the slaughter weight of hogs and curb new production capacity.

The move comes as authorities ramp up efforts to address overcapacity across multiple industries – an ongoing challenge that has fuelled domestic deflation and triggered trade barriers abroad.

“The drop is driven in part by yesterday’s meeting focused on controlling hog production capacity, which is expected to limit future soymeal consumption,” said Wan Chengzhi, an analyst at Capital Jingdu Futures.

Rapeseed meal futures also slid, with the most-active contract on the Zhengzhou Commodity Exchange (CRSMcv1) dropping 2.61% to 2,682 yuan per metric ton.

Rapeseed meal is often used as a substitute for soybean meal in animal feed.

News of the meeting initially lifted the most-active hog futures (DLHcv1) by 2.4% on Wednesday, but prices retreated 2.21% on Thursday.

China’s hog sector continues to grapple with oversupply amid sluggish consumption demand.

Cash hog prices have hovered below 15 yuan per kilogram in recent weeks, down from around 21 yuan last August, according to consultancy MySteel.

“Slaughterhouses have been actively pushing prices down, and with the current off-season in consumption, prices have continued to weaken,” said Pan Chenjun, a senior animal protein analyst at Rabobank in Hong Kong.

Data showed China’s sow herd stood at 40.43 million heads at the end of June, above the normal holding level of 39 million.

Supply is expected to remain elevated in the second half of the year, Pan said.
Source: Reuters