February 4, 2004

 

 

China Soymeal Prices Down

 

Many Chinese crushers are cutting operations due to depressed soymeal markets, but the soyoil markets are rising, boosted by supply concerns, traders and analysts in China said Tuesday.

 

Traditionally, local crushers are expected to resume operation this week after the Chinese Lunar New Year break, but the negative crush margins have deterred some crushers from starting their operations, traders said.

 

"Some crushers in eastern China are maintaining operations at a reduced rate, while some crushers in northeastern China haven't resumed operation yet," a trader from China National Cereals Oils and Foodstuff Import & Export Corp., or Cofco, said Tuesday.

 

The soymeal prices offered by large crushers in Jiangsu province, eastern China were quoted around 2,800 yuan ($1=CNY8.277) a metric ton, virtually unchanged from the pre-holiday level in late January, traders said.

 

Soyoil prices, however, are firming as the reduced crushing will limit supply.

 

The prices of second grade soyoil in Liaoning province, northeastern China, surged to CNY 7,500/ton, compared with CNY7,350/ton a few days ago. In Qinhuangdao, Hebei province, the prices of second grade soyoil also rose to CNY7,300/ton, compared with CNY7,240 late last week, traders said. The rise of soyoil markets is attributed to supply shortage there.

 

Widespread concerns over rampant bird flu have caused many industry participants to have bearish ideas about the soymeal markets, as flocks of poultry are destroyed in infected regions to prevent the spread of the highly contagious disease.

 

China poultry industry represents 52% of the total soymeal usage each year, according to official industry figures.

 

But crushers have little room to adjust downward the soymeal prices and have to hold the prices at the current level, waiting for a recovery of the market that is not in near sight.

 

"The cost of imported soybeans are high, and crushers would have a bigger loss if they sell soymeal at lower levels," said a trader from a Hong Kong based oilseeds company Tuesday. "The soymeal markets are not going to improve very soon, given the uncertainty of bird flu situation and reluctance of end users to enter market at the current level. Therefore, the crushers would like to raise the soyoil prices to offset the losses."

 

Soymeal stock levels in crushers' warehouses are relatively large, due to low demand from livestock producers, while soyoil stocks are tightening at the current reduced rate, because of increasing inquiries from traders after the weeklong holiday break.

 

The trend is likely to continue in the coming week, because the demand for vegetable oil is much brighter than protein meal, traders added.