January 19, 2008

ASA Weekly: China may continue to export large quantities of US soy

China's commerce ministry (MOFCOM) changed its estimates on the country's soy imports for January to 3.05 million tonnes, up from its earlier projected 2.98 million tonnes. The incomplete figures indicate no slowdown for January imports when Chinese crushers would scale down production due to the weeklong Lunar New Year holidays. China purchased 861,800 tonnes for the week of January 9 – its largest purchase of US soy in a single week since June.

China, the world's largest soy buyer, imported 3.3 million tonnes of soy in December, a rise of 12.8 percent from a year earlier, according to official customs figure. Chinese crushers have purchased as much as 1.5 million tonnes of soy in the first half of this month as crushers stepped up imports on rising domestic prices of soy products, according to an official survey.

In related news, crushing margins for soy plants have hit "the highest level" due to surging soymeal and soyoil prices ahead of the Lunar Chinese New Year, the China National Grain and Oils Information Centre (CNGOIC) said in a report.

CNGOIC also predicted that China would import 38 million tonnes of soy in 2008-09, slightly up from 37.81 million tonnes in 2007-08, posting a 32 percent increase from the previous season. "The government will release some of its state soy reserves in the year, which will mean import growth is not as big as last year," said a spokesperson from CNGOIC. "Some special cases contributed to the high growth of imports last year."

The government has agreed to purchase around 6 million tonnes of soy for state reserves from local farmers at higher prices than are available in the international market. This has led to some crushers, particularly in northern areas, increasing their imports.

Chinese demand for soyoil has jumped in recent weeks ahead of the New Year holidays, when crushing plants tend to shut down for a week, triggering a jump in domestic prices. "A tightening soyoil supply in some areas, coupled with sharply lower imports in December, led to continuous price rises," CNGOIC said. 

US '08 soy and grain export inspections top 4 billion bushels

US soy and grain export inspections in 2008 preliminarily totalled more than 109 million tonnes, excluding interior inspections (e.g., cross border into Mexico and Canada, and container inspection). By port range, the Pacific Northwest handled a record 34.3 million tonnes. The Center Gulf handled 55.8 million tonnes, something near the lower end of what it traditionally handles. The Texas Gulf handled its fourth largest volume of 15.3 million tonnes. Texas Gulf elevators could have achieved the second highest volume had hurricanes Gustav and Ike not plowed over the Galveston and Houston area where they severely hampered grain export logistics.

Ocean freight rates started 2009 with a positive tone. The Capesize market is leading the way higher. The positive tone may be related to pent-up demand from the long Christmas break and the positive feeling will be short lived. However, rates are starting the year at historically low levels so any upward movement looks quite impressive. 

Soy complex close higher on higher dry weather in South America and strong demand from China