China is reeling from a nearby shortage of soybean meal, an important ingredient for hog feed, which is shown by a hefty backwardation in the futures market on the Dalian Commodity Exchange. 

Futures for November delivery settled at 4,884 yuan ($676) a ton Thursday, about 800 yuan higher than prices for January. Chinese processors slowed buying of foreign soybeans during the summer when crush margins turned negative, curbing arrivals. Shallow water in the Mississippi River because of drought has also limited prospects for US exports and worsened the crunch.

Demand for soybean meal has also shown a seasonal improvement as farmers fatten their hogs for winter and festivals such as Lunar New Year in January.

China accounts for about 60% of the world’s soybean imports. The domestic shortage has also pushed spot physical prices of soybean meal in Shandong and Guangdong to the highest on record in data going back about two decades. 

Still, more soybean cargoes are expected to head for China after the country stepped up purchases from leading producers as crush margins bounced back. China could also buy more from Brazil and Argentina during the peak US export season if the low levels of the Mississippi River continue to hamper shipments.