January 14, 2011

 

China's soy import surge may ease in 2011

 

China's soy import boom is likely to slow as crushers ditch pricey imports in favour of state supplies, traders said Thursday (Jan 13).

 

US soy prices hit a 30-month high on Wednesday after the USDA cut its estimate of last year's US harvest and said stocks would end this year 10% below analyst expectations.

 

China's massive and growing appetite for US, Brazilian and Argentine soy has been a major driver of global prices in the last few years. In 2010 it shipped in nearly 55 million tonnes of soy, 12 million tonnes more than in 2009, official customs figures showed.

 

"We expect imports this year to grow only slightly or even be flat. An explosive surge like last year is unlikely. Domestic stocks are pretty large," said one trading manager.

 

"Given the higher import costs, some of the market for imports will be replaced with supplies from state reserves."

 

Traders estimate China is still holding as much as 10 million tonnes of state reserves stockpiled since 2008. Its recent attempts to sell some of its stock attracted no bidders due to large imports and poor crushing margins at soy plants.

 

But with current Chicago prices equivalent to RMB4,700 (US$712) per tonne for later shipment, state supplies would become more attractive for crushers in northern China, traders said.

 

"Soon after they have used up current stocks, they will take state supplies by preference," said another trading manager.

 

Recent state sales attracted no bidders partly because Beijing set the bidding prices at RMB3,900 (US$591)/tonne, which - when added to transport and other fees - would give no big price advantage over current imports, they said.

 

Expectations of big releases of state reserves have led some trading houses to expect lower growth in imports in the current marketing year (October 2010 - September 2011) than in the previous year.

 

The China National Grains and Oils Information Centre estimated this year's imports at about 54 million tonnes, and several traders said they expected the figure to be within a few million of that.

 

That means the growth of China's soy imports could slow sharply to about four million tonnes in 2010/2011, down from nine million tonnes in 2009/2010.

 

China's soy purchases are likely to pick up steam from April after recent slowdown due to large stocks and negative crushing margins.

 

Beijing's release of edible oil reserves and a retail price cap have pressured domestic prices of soyoil while soymeal prices stay seasonally low after slaughtering ahead of Chinese Lunar New Year cuts demand for animal feed.

 

Traders expected stocks at ports were still as large as five million tonnes, and cargoes already on the way would offer enough supplies for the coming three months.

 

Ample stocks mean crushers won't rush to book more South American crop after CBOT soy prices rose to its highest in almost 2.5 years on Wednesday.

 

Chinese buyers still need to book cargoes from Brazil and Argentina for June to August shipment but they have largely covered their needs for March to May shipment, and about 12 million tonnes of new crops have already been booked.

 

Some are looking at offers of 2011-12 US new crops.

 

"Purchases have recently slowed down. Lots of imports are arriving and stocks are still quite high," said one trading manager.

 

"Interest should come back again after the Chinese Lunar New Year when arbitrage trading opens for the US new crop. But we are not sure how quick that would be."

 

If farm strikes in Argentina, the world's third largest soy exporter, continue until March, shipment to China may be interrupted, traders said.