March 10, 2006

 

China soybean prices fall on bird flu amid rising supply

 

Soybean prices in China's major producing regions continued to slide this week, as crushers grew even more cautious about buying, worried about bird flu, analysts said Friday.

 

"Crushers think reports of human deaths from the H5N1 virus will discourage people from eating poultry, so demand for soymeal is under pressure," said Li Yunfei, an analyst at the China National Grain & Oils Information Center.

 

Crushing soybean produces soymeal for animal feed production and soyoil for cooking.

 

China's health ministry confirmed Sunday that a 32-year-old man in Guangdong province became the ninth person to die of the H5N1 strain of bird flu on the mainland, and reported Wednesday its 10th human death from the virus, a nine-year-old girl in south-eastern Zhejiang province.

 

Since Sunday, China has started suspending supplies of mainland live poultry and birds to Hong Kong for three weeks.

 

Many crushers are posting very slim profits, with prices of soymeal falling as demand for animal feed shrinks. Some of them have even chosen to stop operating, Li said.

 

Meanwhile, farmers are looking to sell soybeans to get cash for the approaching spring plowing, a development that would boost market supplies.

 

In Heilongjiang province, China's largest soybean-producing region, prices of average quality soybeans were RMB20/tonne lower at about RMB2,420-2,480/tonne.

 

Prices in other major producing provinces, including Jilin province, were RMB10/tonne lower than the previous week, and were quoted about RMB2,550/tonne.

 

"Prices are likely to continue sliding for the rest of the month, and whether they will be able to rebound next month depends on the extent of the spread of the bird flu virus," Li said.

 

COFCO Futures Co. estimates soybean arrivals will rise by 1 million tonnes from February to 2.3 million tonnes this month, as traders contracted more imports after the Spring Festival holiday, when local stocks were diminished.

 

China National Cereals, Oils & Foodstuffs Corp., a major grains trading company, holds a controlling stake in COFCO Futures Co.