Egg investors bet China’s virus fight will curb supply
INTERNATIONAL - Investors in Chinese eggs futures, the only derivative of its kind in the world, are betting the country’s move to stop the spread of coronavirus by curbing transport will lead to tighter supplies later this year.
Futures for September delivery jumped as much as 6.8% on the Dalian Commodity Exchange on Tuesday, while the contract for shipment in May slid.
The surge in the cost of vegetables and other daily necessities could add to China’s growing list of concerns. While China’s economic planner said that food supply can be ensured and prices will remain stable, logistical constraints at some of the country’s ports and factory shutdowns could lead to higher prices for some agricultural commodities.
The Chinese government imposed road blocks in some areas in an effort to stop the spread of the virus, leading some chicken farms to struggle in receiving enough animal feed for their flock. A poultry industry group in Hubei province, which has been in lockdown, said last week that its 300 million chickens were on the “edge of death.”
Some hatcheries in China’s Shandong and Guangdong province killed chicks because the birds could not be transported and they didn’t have the capacity to raise them, Shanghai JC Intelligence said. That may hurt restocking of chickens in the first half of the year, the industry consultant said.
There was an oversupply of eggs in China, but that’s likely to be “completely flipped” if there’s mass deaths of laying hens, JCI said. Demand also tends to be higher in autumn, which may fuel further bullish sentiment in the September contract, JCI’s analyst Alice Xuan said.