April 23, 2004

Soybean Prices Weak In Northeastern China; Low Buying Interest

Farmers in northeastern China were disappointed to find soybean prices sliding in the past week amid much fewer inquiries from trading houses and processors, local traders and farmers in Heilongjiang said Thursday.

In the past two weeks, the prices received by soybean farmers fell by about RMB200 ($1=RMB8.277) a metric ton, according to local grain producers in Heilongjiang, the top soybean-producing province.

"No one came to buy our soybeans, and the prices fell quickly last week," a soybean farmer in Heilongjiang said, who still has a small portion of unsold old-crop soybeans.

The price of soybeans offered for producers once soared to RMB3,600 a ton in the second week of April, but now prices are about RMB3,400, farmers said. Poor crushing margins for most soybean processors and the prospect of higher arrivals of imported soybeans next month have thwarted any buying interest, despite the fact that the local soybean supply is almost at a minimal level.

Chinese soybean markets have rallied strongly in March, largely due to concerns that China could face severe tightness of soybean supplies in late April and that soybean imports could be disrupted during the transition period when the current regulations on genetically modified crops expire on April 20. But the higher than expected arrivals of imported soybeans so far in April, along with lower crush operations, have dissolved such concerns, traders said.

The recent weakness in the soymeal market has led more crushers to cut or idle their operations to avoid a glut of soymeal.

"Crushers are waiting anxiously for any signs of improvement of demand, but so far they are disappointed," a trader from China National Cereals Oils and Foodstuff Import & Export Corp., or Cofco, said Thursday.

The start of soybean planting season this week also kept more farmers busy with fieldwork, traders said. Many farmers in northeastern China showed intentions to plant more soybeans this spring to profit from the high returns of soybean crops, according to an informal phone survey of a dozen farmers in major soybean-producing regions done early this month.

Chinese soybean production is forecast to be reach a record high of 17.50 million tons in the 2004-05 (October-September) marketing year, compared with 16.40 million tons in 2003-04, traders said, citing the forecast from a government-backed grain think tank.