Agricultural futures listed on China's main commodity exchanges moved decisively higher on Monday as the UN issued a threat warning over a huge swarm of locusts that is migrating across Southwest Asia, prompting fears of a potential crop losses.
The migration, which has already travelled across Africa, the Red Sea and a substantial part of the subcontinent, reached close to China's Southwestern border over the weekend according to media reports.
Cotton, rice and wheat futures in China led the rally across the whole agricultural complex, with contracts for all three products surging to a trade-stop on Monday as traders put on speculative longs.
“The market was talking about locusts over the weekend... So both rice and cotton (futures) rallied to trade-stop and sugar was also strong,” one China-based futures trader said.
Futures for the main agricultural products in China such as sugar, rapeseed, soybean and corn, all traded higher, while the most liquid contracts for cotton and rice rallied by more than 3.5%, triggering a trade-stop on the Zhengzhou Commodity Exchange.
“It was related to Pakistan and India,” the trader said, with India the world's largest sugar producer and the migration taking the insects across some of the country's agricultural lands.
The migration of desert locusts has stretched from West Africa to India, with an area bordering Pakistan warned of a “significant threat to crops”, according to the UN Food and Agriculture Organisation.
China’s equity market also reacted to the news, with the Shanghai Composite Index soaring 2.28% intraday to nearly 2,984 points, the highest level in more than three weeks.
Meanwhile, China continues to impose lockdowns on entire cities as it struggles to contain the coronavirus Covid-19, raising further worries for the country's economic output and likely demand.