March 31, 2009

China is considering raising state soy purchases in the northeast, the country's major soy production region, as many farmers are unable to sell their harvests before the planting season next month, industry officials said on Monday (Mar 30).

Due to China's commitments in joining the World Trade Organisation, the government had not discussed raising the import tax on soy as urged for by some inland provinces' crushers at a meeting last week, said Lu Lingang, a deputy secretary general with the China Soybean Industry Association.

As China's own production cannot meet its demands, the crushing industry in coastal areas depends heavily on imports from the US and South America.

Beijing's purchase of domestic soy has helped to shore up domestic prices but crushers in inland provinces have complained it hurts their profits and makes local soy more expensive.

Lu also said China's agricultural ministry urged authorities and local crushers to increase their soy purchases to encourage farmers to keep planting this year.

An official in Heilongjiang Soybean Association said farmers in the province were still holding three million tonnes of soy, which were rejected by Sinograin, due to high moisture. The province's soy harvest was eight million tonnes last year.

Sinograin, the government procurement agency, may fail to meet its purchase target of six million tonnes in the four northeast provinces by end-April due to strict standards on moisture for state reserves, its president said earlier this month.

The Heilongjiang official said Sinograin warehouses lowered soy prices to RMB3,000 (US$438.74) per tonne, or 19-percent lower than government-set prices at RMB3,700 (US$541.11) per tonne, due to higher moisture.

Meanwhile, poor crushing margins have also led many crushers in Heilongjiang to suspend operations and stop procuring soy from farmers.