Report Industry Investment Rating - Not provided in the given content Core Viewpoints - The adjustment of SP futures contract rules expands the scope of hedging, attracting more funds [59] - The growth rate of social inventory has accelerated, which is relatively unfavorable for all non - standard spot goods including broadleaf pulp [59] - The broadleaf pulp has stabilized, and the spread between broadleaf and softwood pulp has strengthened [59] - The domestic papermaking industry mainly uses more broadleaf pulp, but overall it still faces great challenges [59] - The domestic manufacturing data is better than that of the United States, which is relatively positive for SP, but there is more downside space for pulp prices [59] - The pulp market fundamentals are weak [59] Summary by Directory Coniferous Supply Impact on SP Unilateral - As of May 2025, European bleached softwood kraft pulp inventory decreased month - on - month to 238,000 tons, consumption increased month - on - month to 269,000 tons, and the inventory - to - sales ratio was 0.89 times, with a 4.7% year - on - year increase in the average of the past 12 months, which is bearish for SP but with limited impact [9] - As of May 2025, domestic coniferous wood chip imports increased for two consecutive months to 21,000 tons (equivalent to 11,000 tons of pulp), coniferous pulp imports decreased for two consecutive months to 821,000 tons, and the total long - fiber imports decreased by 4.3% year - on - year in the past 6 months, which is bearish for SP but with limited impact [9] Broadleaf Supply Impact on Broadleaf - Coniferous Spread - As of May 2025, broadleaf wood chip imports increased month - on - month to 1.289 million tons (equivalent to 644,000 tons of pulp), broadleaf pulp imports increased month - on - month to 1.309 million tons; coniferous wood chip imports increased for two consecutive months to 21,000 tons (equivalent to 11,000 tons of pulp), coniferous pulp imports decreased for two consecutive months to 821,000 tons. The short - fiber to long - fiber import ratio was 2.35 times, with a 10.5% year - on - year increase in the average of the past 12 months, which is bullish for the broadleaf - coniferous spread [16] - As of May 2025, the use of broadleaf pulp in domestic papermaking decreased month - on - month to 2.224 million tons, and the use of coniferous pulp decreased for three consecutive months to 523,000 tons. The consumption ratio was 4.26 times, with an 8.0% year - on - year increase in the average of the past 9 months, which is bullish for the broadleaf - coniferous spread [16] International Pulp and Paper Trade Impact on SP Unilateral - In May 2025, the domestic pulp import value increased month - on - month to $1.906 billion, and in April, the US pulp import value decreased month - on - month to $308 million. The combined value decreased by 3.6% year - on - year in the past 3 months, which is bearish for SP but with limited impact [24] - In May 2025, the total export value of paper products from Japan, South Korea, and Brazil was $565 million, with a 5.4% year - on - year decrease in the past 3 months, which is bearish for SP [24] Port Inventory Impact on SP Unilateral - As of July 4, 2025, the total pulp inventory in major ports was 2.392 million tons, a 9.8% year - on - year increase, which is bearish for SP [30] Port Inventory Impact on Broadleaf - Coniferous - As of July 4, 2025, the ratio of the four - port inventory to the warehouse receipt inventory increased for four consecutive months to 8.97 times, with a 60.7% year - on - year increase in the average of the past 6 months, which is relatively bearish for broadleaf pulp [35] Manufacturing PMI Impact - As of June 2025, China's manufacturing PMI increased for two consecutive months to 49.7 points, with a 0.2% year - on - year increase in the 12 - month average, with the growth rate narrowing [36] - As of June 2025, the US manufacturing PMI increased month - on - month to 49.0 points, with a 1.3% year - on - year increase in the 12 - month average, with the growth rate narrowing, which is bearish for SP [37] Domestic Papermaking Output and Inventory Impact on SP Unilateral - In April 2025, domestic papermaking electricity consumption decreased month - on - month to 838 million kWh, with a 0.6% year - on - year increase in the past 12 months, with the growth rate narrowing, which is bearish for SP [46] - In April 2025, domestic papermaking finished - product inventory increased for four consecutive months to 77.57 billion yuan, with a 5.6% year - on - year increase in the past 12 - month average, which is bearish for SP [46] US Policy and International Oil Price Impact on SP Unilateral - As of early July, the US economic policy uncertainty index increased month - on - month to 536.4 points, with an 84.5% year - on - year increase in the past 12 - month average, which is bullish for SP [52] - As of early July, the Brent crude oil price decreased month - on - month to $68.3 per barrel, with a 21.3% year - on - year decrease in the past 3 - month average, with the decline rate narrowing, which is bullish for SP [52] International Trade and US Dollar Index Impact on SP Unilateral - In May 2025, the domestic import and export volume decreased month - on - month to $529 billion, with a 2.1% year - on - year increase in the past 6 - month cumulative value, with the growth rate narrowing, which is bullish for SP valuation [58] - In June 2025, the real broad - based US dollar index decreased for five consecutive months to 114.9 points, with a 5.7% year - on - year increase in the past 9 - month average, which is bearish for SP [58]

Report Summary 1. Industry Investment Rating No investment rating for the industry is provided in the report. 2. Core Viewpoints - The soybean meal market is in a situation of mixed long - and short - term factors. The domestic soybean meal valuation is under pressure, while the external soybean import cost fluctuates. It is recommended to buy on dips at the lower end of the cost range and pay attention to the supply pressure at the upper end [2][5]. - The global oil market is expected to be volatile. Although there are some positive factors, the upside space is limited due to factors such as annual production increase expectations and weak demand [7][10]. - The domestic sugar price is likely to continue to decline in a volatile manner. The next rebound depends on significant problems in Brazilian sugar production [12][13]. - The cotton price is expected to continue to fluctuate in the short term. Although there are some positive factors, there is a lack of strong driving force for continuous rebound [15][16]. - The egg price is expected to be weakly stable in many places, and the futures market should consider a strategy of selling on rebounds [18][20]. - The domestic pig price may rise in the north and remain stable in the south. Different trading strategies are recommended for near - term and far - term contracts [22][23]. 3. Summary by Category Soybean/Meal - **Market Situation**: US soybeans declined slightly on Thursday. The domestic soybean meal futures dropped significantly, and the spot price fell by about 30 yuan/ton. The domestic soybean meal inventory accumulation pressure increased, and there were rumors that feed mills were trying to purchase Argentine soybean meal [2]. - **Weather**: The US soybean - producing areas are expected to have favorable rainfall in the next two weeks, covering most of the producing areas [3]. - **Trading Strategy**: It is recommended to buy on dips at the lower end of the cost range of 2850 - 3020 yuan/ton for far - month contracts such as 09. Pay attention to the USDA area report on the night of next Monday [5]. Oil - **Export and Production Data**: Malaysia's palm oil export volume increased in June, and the production showed a mixed trend. The US soybean export net sales decreased in the week ending June 19 [7]. - **Policy**: Malaysia established a special committee to respond to the EU zero - deforestation law. The EPA policy is positive for the oil market [7]. - **Trading Strategy**: The oil market should be viewed as volatile. Although there are some positive factors, the upside space is limited [10]. Sugar - **Market Data**: The Zhengzhou sugar futures price continued to rebound on Thursday. The spot price of sugar in various regions increased. The number of ships waiting to load sugar in Brazilian ports and the quantity of sugar decreased [12]. - **Trading Strategy**: The domestic sugar price is likely to continue to decline in a volatile manner. The next rebound depends on significant problems in Brazilian sugar production [13]. Cotton - **Market Data**: The Zhengzhou cotton futures price continued to rise on Thursday. The spot price also increased. The average predicted US cotton planting area in 2025 decreased by 12.94% compared to 2024 [15]. - **Trading Strategy**: The cotton price is expected to continue to fluctuate in the short term. Although there are some positive factors, there is a lack of strong driving force for continuous rebound [16]. Egg - **Market Data**: The national egg price was mostly stable with a few declines. The supply was generally sufficient, and the digestion speed was average [18]. - **Trading Strategy**: The egg price is expected to be weakly stable in many places, and the futures market should consider a strategy of selling on rebounds [20]. Pig - **Market Data**: The domestic pig price generally rose on the previous day. The northern market had a faster sales speed, and the southern market had less momentum in price increases [22]. - **Trading Strategy**: For near - term contracts such as 07 and 09, it is recommended to buy on dips before delivery. For far - term contracts such as 11 and 01, wait to sell on rebounds [23].

Group 1: Inflation and Consumption Dynamics - The likelihood of experiencing simultaneous goods inflation and service deflation is low, as historical data shows no such occurrence in the U.S. since 1947[3][4][26] - From 1993 to 2024, the share of actual consumption of goods in the U.S. is projected to rise from 27.5% to 34%, while the share of services is expected to decline from 72.5% to 66%[3][4] - Service prices exhibit greater rigidity compared to goods prices, making service deflation unlikely even during economic downturns[4][18][26] Group 2: Wholesale and Retail Profit Margins - The markup in the U.S. wholesale and retail sectors is high, with 14 out of 23 industries having markups greater than 30%[5][29] - However, the profit margins in these sectors are lower than those in other private industries, with operating surplus to total output at 25.2% compared to 25.4% for the private sector overall[5][29] - S&P 500 retail companies show lower average gross and net profit margins (38% and 8.2%, respectively) compared to the overall index averages (45.5% and 22.2%) [6][35] Group 3: Inventory and Import Dynamics - The inventory-to-sales ratio in the U.S. remains low, with most industries having a ratio of only 1-2 months[7][43] - In Q1 2025, the U.S. experienced a significant increase in imports, with an annualized rate of approximately $3.31 trillion, marking a 50.9% quarter-over-quarter increase[7][36] - The wholesale sector showed the most significant inventory replenishment, with an average quarter-over-quarter growth of 0.6%[7][36] Group 4: Corporate Responses to Tariffs - A majority of U.S. manufacturers (87%) indicated they would need to raise prices in response to tariff costs, with 76% of manufacturers and retailers choosing to pass on costs to consumers[10][48] - Adjustments in supply chains and pricing strategies are the primary responses to tariffs, with significant differences noted between U.S. and Chinese companies[10][53] Group 5: Historical Context of Tariffs - Current tariffs may lead to overall rates that are comparable to or exceed those of the early 1930s, but the economic context differs significantly from that period[11][57] - The 1930 tariff led to deflation rather than inflation, contrasting with the potential inflationary effects of current tariffs[11][57]

Core Viewpoint - The article discusses the potential impact of tariffs on U.S. inventory levels and how long these inventories can buffer against rising import costs and consumer prices [1]. Group 1: U.S. Inventory Analysis - As of February, the overall inventory-to-sales ratio in the U.S. manufacturing and trade sectors is approximately 1.5 months, with manufacturers at 1.9 months, wholesalers at 1.3 months, and retailers at 1.4 months, all at relatively low percentiles since the pandemic [4][8]. - If assuming that inventories from manufacturers, wholesalers, and retailers are solely for domestic retail sales, the overall inventory could cover about 4.2 months of sales [5][9]. - The low inventory-to-sales ratios suggest limited buffering capacity against supply-demand imbalances, which could lead to upward pressure on inflation [5][9]. Group 2: Industry-Specific Inventory Insights - In the retail sector, categories such as furniture, appliances, and consumer electronics have a notably low inventory-to-sales ratio of just 1 month, placing them in the 6.5% percentile since the pandemic [13]. - Conversely, the automotive and building materials sectors have higher ratios, exceeding 2 months, indicating a more stable inventory position [13]. - In the manufacturing and wholesale sectors, categories like machinery and textiles show higher inventory-to-sales ratios, while electrical equipment remains low at around 1 month [6][14]. Group 3: PMI and Inventory Trends - The ISM manufacturing PMI inventory index fell to 50.8% in April from 53.4% in March, indicating a decrease in inventory accumulation as companies reduce stockpiling ahead of tariff implementations [17]. - The customer inventory index remains low at 46.2%, suggesting concerns about the sustainability of overall manufacturing inventory levels [17][18]. - Among 18 manufacturing sectors, 5 reported increased inventory levels in April, while 8 sectors, including textiles and transportation equipment, saw declines, reflecting a mixed inventory landscape [18].

Core Viewpoint - On March 8, China announced a 100% tariff on canola oil and meal imported from Canada, leading to a surge in domestic canola meal prices. The overall supply of canola and meal in China for 2024 is expected to be substantial, but the recent tariff may impact the trade flow of canola products from Canada and other countries [3][5]. Group 1: Tariff Announcement and Immediate Impact - The State Council's announcement on March 8 included a 100% tariff on specific Canadian imports, including canola oil and meal, marking an unprecedented move in trade relations [5][4]. - Following the tariff announcement, all contracts for canola meal saw a price limit increase on March 10, indicating a strong market reaction [5][3]. Group 2: Historical Context and Trade Dynamics - The article reviews the history of trade tensions between China and Canada, noting that Canada’s canola seed import ban was lifted in May 2022 after three years of restrictions. However, the anti-dumping investigation initiated in September 2024 has yet to yield a ruling [5][8]. - Canada is the largest producer and exporter of canola globally, with China being its primary buyer, accounting for approximately 74% of Canadian canola exports in 2023 [8][9]. Group 3: Supply and Demand Forecasts - The latest forecasts from the AAFC predict a 5% decrease in canola planting area for the 2025/26 season, with a projected yield of 2.08 tons per hectare, leading to an estimated production of 17.5 million tons, a 2% decrease year-on-year [8]. - Canadian canola exports are expected to drop by 27% to 5.5 million tons, while domestic crushing is projected to increase by 4% to 12 million tons, indicating a shift in domestic demand dynamics [8]. Group 4: Alternative Supply Sources - The article discusses potential alternative sources for canola imports, highlighting Australia as the second-largest net exporter of canola, primarily exporting to Europe and some Asian markets [11]. - Russia is identified as a significant supplier of canola to China, with a notable portion of its canola oil exports directed towards the Chinese market [12]. - Ukraine and the EU are also mentioned as potential sources, with Ukraine being the third-largest net exporter and the EU facing a significant import gap despite being a major producer [13][14]. Group 5: Domestic Production Considerations - The article suggests that domestic canola seed crushing could potentially replace imported canola meal, although the current domestic supply primarily consists of non-delivery products [15]. - The narrowing price gap between soybean and canola meal may lead to reduced usage of canola meal in feed if Sino-Canadian relations continue to deteriorate [17].

Investment Rating - The industry investment rating is "Overweight" [1] Core Insights - The USDA's February report indicates a decrease in global corn and soybean production, while wheat production is expected to rise [1][4] - The global corn supply-demand gap is widening, leading to a decrease in the corn stock-to-use ratio, which is favorable for international corn prices [4][10] - Domestic corn market activity is recovering post-Spring Festival, with strong demand from feed and processing sectors [4][22] Summary by Sections Corn - For the 2024/25 season, global corn production is forecasted at 1.212 billion tons, a decrease of 17.6 million tons from the previous year, primarily due to drought conditions in South America [10][11] - Global corn consumption is projected to increase to 1.238 billion tons, with ending stocks expected to drop to 290 million tons, marking the lowest stock-to-use ratio since the 2016/17 season at 20.3% [10][18] - China's corn production is estimated at 295 million tons, with imports expected to decrease to 10 million tons, reflecting a tightening domestic supply [18][20] Wheat - The USDA forecasts global wheat production for 2024/25 at 794 million tons, an increase of 2.58 million tons from the previous year, driven by higher yields in Kazakhstan and Argentina [29][30] - Global wheat consumption is expected to rise to 804 million tons, with ending stocks projected to fall to 258 million tons, resulting in a stock-to-use ratio of 25.4%, the lowest since the 2015/16 season [29][31] - China's wheat imports are expected to decline to 8 million tons, the lowest level in five years [30] Soybeans - Global soybean production for 2024/25 is projected at 421 million tons, a decrease of 3.5 million tons from the previous year, largely due to adverse weather in South America [6][29] - Global soybean consumption is expected to increase to 406 million tons, with ending stocks projected at 124 million tons, leading to a stock-to-use ratio of 21.1%, the highest since the 2019/20 season [6][29]