February 14, 2011

China's soy prices flat; auction sales surge 74%

Soy prices in China's major producing areas were mostly unchanged in the two weeks to Friday (Feb 11), with several areas witnessing a slight rise, as most crushers were not operating due to the Lunar New Year holiday.

Crushers and traders bought soy from farmers at about RMB3,770-3,800 (US$571-$576)/tonne in Qiqihar in Heilongjiang province, unchanged from two weeks earlier.

Import prices of soy at major Chinese ports such as Tianjin, Qingdao and Zhangjiagang were in a range of RMB4,300-4,350 (US$652-$659)/tonne, also flat.

Meanwhile, China's Heilongjiang province sold 59,281 tonnes of soy out of nearly 80,000 tonnes it offered at a Friday auction, which was part of a series of nine auctions in which the government has so far sold 167,000 tonnes from an offered 1.72 million tonnes.

The minimum price was set at RMB3,750 (US$569)/tonne, with auction prices reaching a high of RMB3,840 (US$582)/tonne, well below import prices that have easily topped RMB4,000 (US$606)/tonne in recent weeks. Friday's soy stocks were from 2008 inventories.

With locally-produced soy becoming more attractive for buyers, soy prices will likely rebound soon when business activities return to normal midway through this month, analysts said.

China produced about 15 million tonnes of soy in 2010, up just 0.7% compared with 2009, according to the Chinese Grain Network.

Soy demand is expected to rise by 8.3% in the crop year ending September 30, indicating more imports will be needed, it added.

Analysts estimated that positive demand outlook and uncertain supply will underpin domestic soy prices, with the severe drought that is hitting most wheat planting areas adding to the upward pressure in the long run.