April 30, 2009
China may slow soy imports to control worsening oversupply issue
China's huge soy imports have resulted in an oversupply in the domestic market and the situation may worsen in the months ahead as more shipments are arriving soon.
Due to the diminishing domestic crush margins, Chinese importers have cancelled up to five cargoes and made no new purchases this week, traders have said.
As the cancellations lower demand from China by more than 300,000 tonnes, it could also signify a change of fortune in US soy prices which rose 13 percent in the last six months while global commodities have lost their value by 20 percent.
During the first quarter of this year, China's soy imports jumped more than 30 percent to 10.12 million tonnes which pushed the benchmark Chicago Board of Trade (CBOT) to a six-month high earlier this month.
China's Ministry of Commerce last week has warned of the risk associated with large inventories and urged importers to adjust their speed of procurements. It added that imported edible oil and oilseed stocks at Chinese ports were too high due to heavy imports between January and April. Meanwhile, the annual Chinese trade mission to the US, usually a major purchasing fixture on the soy calendar, will bring little orders this year.
Traders said China is expected to have at least half a million tonnes of soy surpluses in May, which will double in June when seven million tonnes are due to arrive. They also estimated soy inventories at the country's ports to be around 3.9 million tonnes, up from the usual two to three million tonnes.
The possible slowdown in China's soy imports would probably affect Brazil and Argentina most as these two countries' imports to China usually increase in April and May while US soy shipments start to wane. Argentina is already expected to export less than usual this year due to its domestic strike.
China's soy imports began its hike from the last quarter of 2008 as the government increased its purchases to build state reserves and ensure farmers could get a good price. The government has since acquired more than four million tonnes of domestic-produced soy and it has extended its procurement campaign until the end of June.
