April 14, 2011

 

China cancels three soy cargoes

Chinese buyers have cancelled at least three soy cargoes and are in talks to cancel or defer more shipments, prompted by poor crushing margins and Beijing's plan to release state reserves to counter food inflation.

 

Lower soy imports by China, the world's biggest buyer, could weigh on the benchmark US price, already down by more than 5% in April in a general commodities selloff and on prospects of a bumper harvest from South America.

 

Facing negative margins for crushing the beans into soyoil, Chinese buyers are also in talks to cancel or defer at least another 10 shipments, traders said, although not all of those may go through.

 

"We have washed out three cargoes for May and June shipment for in-house trading," said a China-based trader with a foreign trading house.

 

The trader said his company has been recently asked by one state-owned trading company to cancel two South American soy cargoes and "we can accept the cancellation if the (buyback) price is good enough".

 

Although cancelled cargoes amount to around 150,000-180,000 tonnes, a tiny part of China's monthly imports of around 3-5 million tonnes, it could lead to more cargoes being delayed, slowing purchases from South America in coming months.

 

"We expect more South American cargoes to be delayed to September and beyond because of poor crush margins," said a Singapore-based trader.

 

Another trading executive with an international trading house said the cancellation of as much as 10 cargoes, or more than half a million tonnes, was unlikely.

 

"Buyers and suppliers are still negotiating with each other, we don't think so many cargoes can be washed out," said the executive. "No buyers outside China have incentives to take such a large volume."

 

China imported 54.8 million tonnes of soy in 2010, up 28.8%, mainly from the US, Brazil and Argentina. China's imports account for more than 60% of total world trade.

 

Chinese buyers take soy from South America during April to September and shift to US supplies from October.

 

"China's total soy imports in 2010-11 would not be hurt although many intend to cancel or defer cargoes. If cargoes can be resold, the buyers are most likely to be Chinese," said one analyst with a big state-owned soy trader.

 

China is likely to import 53 to 54 million tonnes of soy in 2010-11 (Oct/Sept), up 5-7% from the previous season, but the growth rate is seen slowing from 22% in 2009-10, state grains trader Cofco said Monday (Apr 11).

 

The slowdown is partly because of Beijing's sale of three million tonnes of domestic soy, which was nearly one month of import volumes based on China's imports so far this year.

 

Crushers in the coastal areas are willing to take domestic soy reserves because of the attractive price offered by Beijing.

 

Brazilian soy was quoted at about RMB4,500 (US$688)/tonne, as compared with RMB3,500 (US$535)/tonne for state reserves.

 

The low-priced government soy reserves were offered to 5-6 big crushers, which have been ordered by Beijing to cap prices of soyoil at about RMB1,000 (US$153)/tonne lower than market prices.