May 11, 2012

China's state soy reserves to offer 2.5 million tonnes in Northeast

To cut government stocks ahead of the new crop, China will release 2.5 million tonnes of soy to crushers from state reserves, mainly in the Northeast's inland provinces, industry sources said Thursday (May 10).

Sources expected the release, which will start late May, to have only a minor impact on imports because soy plants in the country's northeast use only domestic soy for crushing.

"The release takes place mainly in the northeast provinces, we don't expect any major impact to crushers south of the area which use imported soy," said one industry source.

The amount of soy from 2008-2010 harvests would be offered at regular auctions at prices of RMB3,700-3,850 (US$590-$610) per tonne, lower than the RMB4,250 (US$674) per tonne for imports offered at major ports in the north.

Beijing last year released about the same volume of state reserves at discounted prices to some major crushers, the release triggered cancellations of a large number of imported cargoes.

"The market has been expecting this for a while. We don't think there would be any cancellations as happened last year. Crushers are still looking for cargoes and unlike last year, when they overbooked at the time," said one senior soy trader.

Crushers have been cautious and slowed down their purchases for shipment after July as current CBOT prices would give negative crushing margins, traders said.

But the prices are attractive to crushers in the northeast, where domestic soy was priced at about RMB4,100 per tonne (US$650).

Some crushers in northern provinces of Shandong and Hebei have since late April increased purchases from the regular state reserves, although the volume was very small - 68,328 tonnes this week.

The sources said that because the reserve stocks were aging, the quality of the soy was deteriorating.