March 23, 2011

China was unable to sell out any of the 299,475 tonnes of soy reserves it offered at an auction Tuesday (Mar 22), repeating the failure two weeks ago on March 8, said the National Grain & Oil Trade Centre.

The floor price was set at RMB3,920 (US$598)/tonne at the auction, compared with current purchase prices of around RMB3,850 (US$587)/tonne for soy in major producing areas.

Meanwhile, soy prices on international market have been choppy in downward trend since the middle of February, followed by sluggish performance on domestic soy market. This has made traders take a wait-and-see stance, which is also a reason for the failure in soy auction.

Furthermore, heavy stock pressure is another reason for thin trade at reserve soy auctions. Soy stocks at domestic ports have reached about 5.7 million tonnes, due to surging imports last year.

Data from the General Administration of Customs show that China's soy imports in 2010 hit record high of 54.8 million tonnes, a jump of 29% on-year, and the imports in January of this year jumped 25.96% over a year earlier to 5.14 million tonnes. However, the imports last month slumped 21% from the same period of last year to 2.32 million tonnes.

Now the government is trying to sell soy from state reserves to give room for new crops. This is the eighth batch of state soy reserves put under the hammer since December of last year. Due to unappealing floor prices, China only sold out 11,100 tonnes of about 2.36 million tonnes of reserve soy at these auctions.

Meanwhile, cost of imported soy at Chinese ports stood at RMB4,560 (US$696)/tonne in February, higher than earlier market expectation, data from the General Administration of Customs showed.

Edible oil processing mills along the coast incurred losses of RMB60-200 (US$9-30)/tonne last month and continued to be in the red in the first 10 days of March.

Recent slump of soyoil and soymeal prices in coastal areas may affect domestic soy imports in the following period.