April 5, 2010

China's soy buyers are waiting before signing fresh contracts on expectations that prices in South America will fall by a big margin in coming weeks due to record harvests.

According to China National Grain and Oils Information Centre (CNGOIC), South American soy for July shipment was sold at US$420/tonne C&F or RMB3,383/tonne after import tax, giving a crushing margin of RMB232 (US$34) per tonne based on calculation on forward-months meal and oil prices.

Government restrictions over soyoil imports have spurred physical trade and prices at home, but rises were capped by sluggish demand and ample stocks. Soyoil demand was seen at a lower-than-normal level in future weeks.

Low pig restocking levels amid outbreaks of diseases and large soy imports since March have increased soymeal stockpiles and pressured prices, which are likely to fall further. Feedmills are not active in building inventories and demand is seen staying low.

Corn prices have kept rising amid tight supply. The rising price could prompt farmers to sell more from last year's harvest. Bidding for state corn reserves has become active. Corn demand has warmed up, but a big price spike is unlikely.

Forecast by the Chinese Academy of Agriculture Sciences showed China's rapeseed harvest this year could fall by 12.3% from last year.