February 15, 2011

China's soy reserve auctions spring up

Northeastern China's Heilongjiang province has launched four auctions of soy reserves this year, and auction volume has been recovering mainly due to higher prices of import soy and active buying from soyoil processing mills.

The country's largest soy producer sold out 79,790 tonnes or 74.13% of reserve soy it offered at an auction Friday (Feb 11), at an average price of RMB3,779 (US$573)/tonne, higher than the transaction rates of 7.27%, 19.56% and 44.02% at the previous three auctions in January.

Import prices of soy have been rising in recent weeks and have already topped RMB4,000 (US$606)/tonne. This has made domestic soy more attractive in prices.

Besides, soyoil and soymeal prices registered record highs recently, which have improved profit for soy crushing mills and provided favourable conditions for state soy reserves to come onto market.

Meanwhile, improving sales at auctions also strengthened market confidence in soy prices. December soy contract on the Dalian Commodity Exchange edged up 0.34% Friday, and soymeal and soyoil contracts for December delivery respectively gained 0.03% and 0.11%.

As domestic soy has price advantage over import soy currently, China is likely to smoothly sell out its five million tonnes of soy from state reserves, analysts said.

He pointed out that the prices of import soy at ports hold around RMB4,200 (US$637)/tonne, and are expected to rise to RMB4,700 (US$713)/tonne in March, compared with current purchase prices of domestic soy are RMB3,800 (US$577)/tonne.

As more reserve soy enters market, soy prices may be pressured with increasing supply.

China had accumulatively auctioned about 1.48 million tonnes of soy from state stockpiles since December of last year, but only 5,000 tonnes were transacted due to unappealing floor prices at these auctions.