China soy imports may advance to record on higher demand

Soy imports by China may climb to a record on demand for livestock feed and increased crusher capacity, helping absorb surging global supplies, the country's third-biggest processor said.

About 45 million tonnes will be shipped to China in the year ending September 30, according to Guo Feng, deputy general manager of Chinatex Grains & Oils Co. That is 5.9% more than the 42.5 million tonnes predicted for 2009-10 by the USDA.

China, the fastest growing major economy, buys more than half the world's soy exports. Incomes for hundreds of millions of farmers are rising faster than urban dwellers, and rural households are spending more of their cash on pork and dairy products, driving growth in the livestock industry, Guo said. Imports of beans may be climbing faster than the market can consume, slowing next year's purchases, he said.

While soymeal consumption declined since January as farmers killed more hogs, demand for meal in the coming months should have a seasonal recovery, adding that a rebound in demand may slow an increase in inventories after the arrival of large shipments of South American soy, he said.

"But how sharply meal inventory falls depends on whether farmers are increasing herds and how much crushers will really import," Guo said. Should overall shipments rise to 46 million tonnes, meal inventory may stay flat, but should imports reach 48 million tonnes, unsold meal will continue to pile up, he said.

Meanwhile, competing investments in the crushing industry are also fuelling imports, Guo said. As many as nine newly built plants may begin operations this year, lifting the country's crushing capacity by more than 40,000 tonnes a day.

COFCO Ltd., the country's largest grain trader, will expand crushing capacity by more than 40% to 10 million tonnes by the end of 2010 or early next year, to match the level of the biggest producer Wilmar International Ltd., COFCO chairman Ning Gaoning said.

Even as China increases imports, global soy prices in the current year are pressured by supplies after a 20% increase in world output, or 40 million tonnes. The market has not adjusted for the extent of the increased supply as part of the US crop surplus last year offset a low carry-in inventory, he said.

Soy futures in CBOT have dropped 8.4% this year on concern that record harvests in Brazil and Argentina will outpace demand. The contract for May delivery traded at US$9.6050 a bushel earlier.