January 17, 2011

China's soy prices stay flat amid sluggish trade

China's soy prices in its major yielding areas were mostly unchanged in the week ending Friday (Jan 14) due to farmers' reluctance to sell, even as more crushers turned to local soy amid higher import prices.

Soy prices in Harbin, in the north-eastern province of Heilongjiang, remained around RMB3,860/tonne (US$585.38/tonne), which was unchanged from a week earlier.

Imported soy prices at major ports stood around RMB4,200-4,250/tonne (US$636.94-$644.52/tonne), around RMB200/tonne (US$30.33) higher than at the end of 2010.

Crushers want to stockpile more local soy while prices are relatively stable ahead of the Lunar New Year, but farmers prefer to hold onto stocks in hope of further gains, analysts said.

Buying by crushers may not send prices higher, however, as the government holds sufficient reserves to stabilise prices, they added.

Private-sector estimates put the government's soy reserve around 10 million tonnes.

"China will keep its (monetary and credit policies) in a tightening mode before the National People's Congress (NPC), so we don't expect a substantial rebound before then," experts said.

Most units of China Grain Reserves Corp, which handles the country's reserves, have yet to start buying because their participation in the market would push prices higher, contradicting the purpose of the reserve system, which is to ensure market supply and stabilise prices.

China Grain Reserves had purchased only 1.06 million tonnes of soy for state stockpiles as of December 31, according to the Chinese Grain Network, a consultancy owned by China Grain Reserves.