February 24, 2004

China's Soymeal Demand To Remain Sluggish In Near Term

Soymeal demand in China is expected to remain sluggish in the near term due to bird flu outbreaks in the country, lowering soybean processing margins and causing postponements or cancellations of soybean import sales, according to a report from Shanghai JC Intelligence (JCI) in Beijing.

The demand drop has occurred amid a traditionally weak off-season for feedstuff consumption, while import costs for soybeans are on the rise, JCI said. Because of the current uncertainty over the spread of bird flu in China, local soymeal demand from the poultry industry is expected remain sluggish for the next few months, further pressuring local soymeal prices and margins.

Although the outlook for livestock and aquaculture consumption is bullish as consumers cut back on poultry, near-term soymeal demand remains weak as aquatic and livestock feed production will not be under way until the end of March or the beginning of April, JCI said. Thus, weakness is expected to continue in the domestic soymeal market in the near term.

Most crushers currently are holding ample stocks of imported soybeans, forcing them to maintain their operations this month, JCI said. But some crushers have washed out or postponed their February-March shipments of U.S. soybeans.

Decreased import arrivals are expected in March and forward months, which crushers hope will ease the pressure, JCI said.