UPL Catches Swine Flu From China!
China is the world’s largest consumer and importer of soybean, while Brazil is a large producer and exporter of the protein source. Due to the US-China trade war, Chinese soya bean buyers turned to Brazil for their imports in 2018.Â
UPL was seen to benefit immensely from this switch as UPL derives 34% of its revenue from Latin America, with a large portion of revenues coming from soybean via their crop solution business.
However, the outbreak of African swine fever in China has reduced the pig population thus reducing the soya bean demand. According to reports, soybean exports and production from Brazil dropped 2-5% last month.
Source: Reuters, INDwealth Advisory
According to S&P Global Platts, imports of soybean by China in the first half of the current marketing year (October-September) were significantly lower than the average imports in the earlier two years.
Moreover, with rising US inventories, US exports are being directed to Europe, which has been a large market for Brazil’s soya bean exports.
These events are keeping a check on the soya bean prices which dragged the UPL stock down 8% on 20 June.Â
UPL has been a widely held stock over the last year with over 34% institutional holding, however, this unfolding situation will cause pressure on the stock in the short term.
Below is a snapshot of INDwealth’s proprietary analysis on UPL Â
