May 21, 2009

Soy analysts on Wednesday (May 20) dismissed a reported proposal for China to spend some of its foreign exchange reserves on building a stockpile of 50 million tonnes of soy, citing difficulties in storage and availability of soy supplies as reasons to fail the plan.

 

The figure represents one year's worth of soy consumed in China and it accounts for 68 percent of the world's traded soy, which is estimated at 73 million tonnes by the US Department of Agriculture in the 2008-9 marketing year.

 

The Economic Information Daily quoted unidentified experts' suggestions to use China's foreign exchange reserves to boost soy and other grain reserves. It added that China's soy inventories are advised not to be lower than a year's consumption due the country's heavy dependence on imports.

 

China, the world's top soy importer, has shipments of 39.5 million tonnes for the marketing year ending in September. China is estimated to produce 15-16 million tonnes of soy this year.

 

Chen Lina, an analyst with Beijing Orient Agri-Business Consultant Co. Ltd, said the government could not afford such a huge amount of reserves. Such a large-scale stockpiling exercise would also cause Chinese soy plants unable to find soy to crush.

 

Doug Whitehead, ANZ's agricultural commodity strategist, said it would be unrealistic for China to build such a reserve in a short span and they have to do it over a number of seasons. Investment on infrastructure will also be needed.

 

China has struggled to stock up more than four million tonnes of soy by buying directly from farmers this year and traders estimated the country's total reserves at little more than six million tonnes, the highest level ever.