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Egg Investors Bet China’s Virus Fight Will Curb Supply

By Bloomberg / Feb 05, 2020 03:48 AM / Business & Tech

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Investors in Chinese egg futures, the only derivative of its kind in the world, are betting the country’s moves 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% Tuesday on the Dalian Commodity Exchange, while the contract for shipments 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 food supplies 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 to stop the spread of the virus, leading some chicken farms to struggle in receiving enough feed for their flocks. A poultry industry group in locked-down Hubei province said last week that its 300 million chickens were on the “edge of death.”

Some hatcheries in China’s Shandong and Guangdong provinces killed chicks because the birds could not be transported and producers 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 are mass deaths of laying hens, JCI said. Demand also tends to be higher in the autumn, which may fuel further bullish sentiment on the September contract, JCI’s analyst Alice Xuan said.


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