April 20, 2009
China 2-month soy purchase extension may have little impact
China may extend its state purchases of soy by two months to end-June, but the market impact will probably be limited, analysts said Friday (April 17).
Some market participants said the government likely won't be able to complete its planned purchase of 6 million tonnes of soy in the northeast producing areas by end-April as the moisture content of farmers' soy is too high to meet the government's standard.
"It could just be a gesture to (support prices), but it doesn't have much actual meaning," said Yu Haifeng, an analyst with Tianqi Futures.
The government is paying RMB3,700 a tonne for soy that meet its standards, but farmers have seen prices for soy that the government won't buy falling - to as low as RMB3,200/tonne this week.
Analysts said the government has bought around 5 million tonnes of soy. Farmers have been eager to sell their soy ahead of spring planting, which is adding downward pressure to local prices.
Farmers don't know how to lower the harvest's moisture content, so they won't be able to boost the quality to the government's standard, said Liu Peng, a manager at Longma Consultation in Heilongjiang province.
