April 18, 2011

Weak demand pushes down China soy's value

Soy prices in China's major producing areas and ports fell slightly last week until Friday (Apr 15), as demand from crushers stayed weak due to high stock levels and government price controls on edible oils.

Prices in China's northeastern Heilongjiang province, the nation's top producer, fell about RMB20 (US$3.06) a tonne to RMB3,780/tonne-3,860/tonne (US$578.69-$590.93). Import prices were down RMB50/tonne (US$7.65) at RMB4,150/tonne (US$635.33) in major ports.

An index measuring China National Grain Reserve Corp.'s soy purchase prices was down 1% from a week earlier, according to Chinese Grain Network, a consultancy owned by the state grain stockpiler.

Soy inventory levels are high, while some crushers have suspended operations, weakening demand.

But a government soy purchase programme prevented prices from falling further. As of April 10, the state grain stockpiler had purchased 2.7 million tonnes from farmers for reserves, up 170,000 tonnes from a week earlier.

Chinese buyers have cancelled eight to 10 cargoes of soy since March, and have agreed with suppliers to postpone 15-20 more cargoes, Heilongjiang-based Tianqi Futures Co. said, adding its statistics were "incomplete."

With the government planning to sell about three million tonnes of soy to selected crushers in exchange for agreements to keep prices stable, the market will continue to face an oversupply of soy, it said.

An auction of 20,700 tonnes of soy Friday from Heilongjiang's provincial government reserves attracted no bids.