February 15, 2005

China's soybean supplies abundant, prices weak in coming weeks

An eFeedLink Exclusive Report

Soybean prices in China continued to slide in January. The price of Grade 3 soybeans averaged RMB 2,757/ton, down 1.82 percent month-on-month. 

• Ample soybean supplies in the market 

According to preliminary surveys, about 45-50 percent of soybeans in Heilongjiang have been sold. However, farmers are still holding on to a major part of the harvested crop, in anticipation of the next peak sales period expected before the spring sowing.

Although US and Brazilian shipments are currently slower compared with the same period in 2004, they are expected to pick up strongly before newly harvested beans from South America arrive at the markets. 

Meanwhile, most crushers in China will cease operations for maintenance in the period following the Spring Festival, leading to reduced demand for soybeans in the near term. 

• Soybean imports post marginal decline in 2004 

According to Customs data, China imported 20.23 million tons of soybeans in 2004, a decline of 510,000 tons or 2.46 percent compared with the same period in 2003.  Imports were higher than expected mainly due to a surge in imports in the fourth quarter of 2004 which pushed figures for the year to a higher level. News that the soy trade dispute between China and Brazil may be resolved soon also helped boost imports.

In conclusion, with farmers' soy inventories at historical highs, coupled with continual arrival of shipments at Chinese ports, soy supplies are seen to be ample in the coming weeks. And with the threat of a bird flu outbreak dominating market sentiments, traders and crushers are adopting a more cautious approach in their operations. Analysts thus expect soybean prices to remain weak in the near term.