February 20, 2009

Some buyers in China, the world's top soy importer, may suspend some US soy imports, including cargoes that are already afloat, after soymeal prices' sharp fall which wiped out crushing margins, traders said on Thursday (February 19).

A manager from a major trading house said that Chinese buyers are concerned on soymeal prices' drastic fall and that they are "unsure if they can make money on the cargoes that are already on the way."

The trader added if the importers have ordered too many cargoes and hadn't paid enough attention to the futures market, "they might have to (cancel some)."

China's domestic soymeal market has partly weakened due to of human deaths from bird flu early this year, prompting more culls of poultry that could reduce feed demand. Also, many animals were slaughtered before the Lunar New Year holiday at the end of January.

Traders see soy imports from February to April to hit more than 3 million tonnes each month, with March and April imports each month expected to be as high as 3.5 million tonnes.

Domestic meal have also fallen by 20 percent in one month after media reports of human deaths from bird flu last month and farmers have yet to restock animal numbers after the Lunar New Year holidays, traders said.

A trading manager said crushing margins have been squeezed a lot as feed demand was declining and crushers can only manage to break even.

However, some traders said they had not heard of any cancellations, stating the price difference is big enough for the Chinese buyers to give up guarantees and meal prices have not fallen that much.

Buyers have to guarantee payment in advance and so cancelling would mean giving up the cost of the shipment.

Some of the most expensive US cargoes were ordered at about 3,600 renminbi per tonne arriving China, higher than the 3,100 renminbi per tonne now for South American soy, the analyst said.

US$1 = RMB6.83 (Feb 20)