China buys more domestic soy for reserves

 

 

China has increased its domestic soy purchase target by 21 percent to 7.25 million tonnes, in an effort to help farmers sell last year's surplus before the planting season, the State Administration of Grain said on Thursday (April 30).

 

The agency has upped its existing target for soy purchases by 1.25 million tonnes due to farmers' struggle in selling to market that is swamped by record import volumes -- which were prompted in part by China's own soy buying campaign.

 

Buying will continue until the end of June, with the government offering its previous purchase price of 3,700 yuan (US$542.22) per tonne, around 300 yuan higher than the price of imported US soy arriving in China this week.

 

Dalian soy and soyoil futures rose on Thursday. Soyoil contracts rose by their 5 percent daily limit in afternoon trading.

 

State buying agency Sinograin has not reached its previous 6 million- tonne purchasing target as farmers in major soy growing areas have been unable to meet the state reserve's moisture standards. The statement did not say if the government would lower the standard.

 

Wang Xiaoyu, an official with Heilongjiang Soybean Association in China's top soy-producing province said the warehouses will not likely lower the standard but farmers will still be able to sell their surplus soy.

 

Farmers in the province were still holding about 1 million tonnes of surplus after some sold their crops to local crushers at lower prices than the one offered by the government, he said.

 

Despite the government's promise of extra purchases, an initial survey by the association showed farmers in the province intended to plant 15 percent less this year from last year.

 

Beijing's stockpiling of domestic crops, which is meant to help farmers, has prompted the domestic crushing industry to shift to cheap imports. China, the world's largest soy importer, is likely to bring in a record quantity of imports this year after 37 million tonnes last year.

 

The increased government buying target came while some traders were talking about the likelihood of Sinograin selling stocks back to the market due to lack of storage space. Sinograin has so far bought about 4 million tonnes of domestic soy and has reserves of nearly 2 million tonnes of imported soy.

 

The administration said last month it would move 1.37 million tonnes of soy from reserves in the northeast to storage in major consuming provinces.

 

Under the increased buying plan, Sinograin will buy an extra 1 million tonnes in Heilongjiang, 200,000 tonnes in Inner Mongolia and 50,000 tonnes in Jilin province, the statement said.