March 13, 2010

China soy cancellations expected to slow

China's soy buyers who have overbooked US cargoes may still cancel a few more but the trend would be offset by loading delays in Brazil.

China, the world's top soy buyer, cancelled purchases of 192,400 tonnes of US soy in the current marketing year, sending Chicago Board of Trade prices down by 2.6% on Thursday (Mar 11).

Traders in China said they believed a large Chinese buyer had switched an import order from US to cheaper South American soy for later shipment on expectation of better crushing margins.

China's feed demand was at a seasonal low in the first three months of this year after more livestock were slaughtered than usual for the spring festival and breeders slowed restocking due to pig diseases, causing pork prices to fall.

"The cargoes were switched to South America. There could still be some more if the price gap continues expanding," said one trader with an international trading house.

China has bought a record 21.70 million tonnes of US soy in the current marketing year, up from 16.4 million tonnes at the same time a year ago.

"We don't expect many to switch. Crushing margins are still positive for many crushers and soymeal stocks are not as high as before the holidays, though some are having problems selling," said Eric Zhu, general manger with a private soy trading house, Hanfeng Huayu International Trading Co. Ltd.

China's soy imports were not expected to slow down. With imports in January and February much lower than earlier anticipated, traders expect heavy imports in coming months, particularly May and June.

"China has booked very heavily from Brazil and Argentina. For April shipments, China has booked three million tonnes from Brazil, one million tonnes from Argentina," said one trading manager in Singapore.

One official with a major crusher said, "It is impossible to cancel US soy. But we are a bit worried over Brazil soy cargoes. Some cargoes could be cancelled if they were delayed too long."

Traders said loading of early-matured Brazilian soy could be held at ports for about 20 days.