May 12, 2004

 

 

China May Have Cancelled Up To 10 Soybean Cargoes

 

Chinese crushers might have cancelled up to 10 cargoes of South American soybeans this year. This is largely due to poor crushing margins, according to traders and industry officials in China.

 

"Crushers in Shandong and other major consuming regions have washed out about 10 cargoes of South American soybeans this year," a trader with a soybean crusher in Shandong province said.

 

China may also have cancelled some cargoes of Brazilian origin because of sanitary concerns.

 

China is earlier believed to have rejected a cargo of Brazilian new crop soybeans which arrived late April at the port of Xiamen, in southern China's Fujian province. This comes after quarantine authorities discovered traces of a harmful fungicide in the cargo.

 

Crushers in China are struggling with negative crushing margins as the cost of imported soybeans has risen, while soymeal prices remain weak due to sluggish demand from the livestock and poultry industries.

 

In the first quarter of 2004, poultry stock in Shandong, the top poultry producing and exporting province in China, was pegged at 573.67 million heads, down 2.1 percent from the same period of 2003.

 

The decline was the result of a large scale culling of birds to prevent the spread of the deadly bird flu virus. The virus had devastated poultry farms in China and Southeast Asia earlier in the year.

 

Amid poor demand from the poultry industry, soymeal prices offered by crushers in Shandong are around 3,250 yuan ($1=CNY8.277) a metric ton this week, down from CNY3,550/ton five weeks ago.

 

End users in livestock and poultry industries have been reluctant to make forward coverage, said another official from a local grain trading house in Beijing on Tuesday.

 

"Soybean crushers are in difficult times, because Chicago Board of Trade soybeans are still firm. But the recovery in (soymeal) demand is yet to take place," said the Beijing-based official.

 

In April, China imported about 17 cargoes, or nearly 1 million tons of soybeans. This was sharply lower than the 2.21 million tons imported in April 2003.

 

However, soybean arrivals in the coming weeks are likely to increase as the South American new crop soybean harvest is nearing an end. Moreover, crushing margins are expected to improve as demand from the livestock and poultry industry rises. A trader with a local brokerage house in Beijing said soybean imports in May might reach 30 cargoes.

 

China's soybeans imports are still expected to be lower this marketing year. In the October 2003 to September 2004 marketing year, China is predicted to import 19.50 million tons of soybeans, according to local traders and analysts. The USDA had earlier forecast 2003-04 imports at 20.50 million tons.

 

In the 2002-03 marketing year, China imported 21.42 million tons of soybeans.