May 6, 2005

Soy crushing companies in China facing harsh demands

Soybean crushing plants in China are facing closures this year because suppliers are demanding larger up-front payments after buyers failed to follow through on contracts last year.

According to a source the defaults last year cost shippers more than US$350 million. Rising U.S. harvests and last year's avian flu outbreak have contributed to a 41 percent fall in soybean prices from a 15-year high of over US$10.5 a bushel in March 2004. Soybeans are crushed for cooking oil and animal feed.

Cofco International, China's biggest soybean processor, said last month that China's oilseed crushing industry lost US$480 million last year.

With the tougher terms and conditions imposed by suppliers, companies are less able to deal with high freight rates and sharp fluctuations in international soybean prices. Some smaller companies are left with no other choice but to shut down.

China could purchase a record 24 million metric tons of soybeans in the year ending September, the China National Grains and Oils Information Center said. The center estimated the country's soybean crop at 18 million tons last year. China imports beans mostly from the United States and Brazil.