May 26, 2010

China may soon cut soy purchases

China may soon reduce soy purchases after its recent buying spree which may contribute to lower soy prices in the next 2-3 months, Hamburg-based oilseeds analysts Oil World forecast on Tuesday (May 25).

According to Oil World, the sharp increase in soy arrivals in China is likely to lead to a considerable building of stocks, which could result in a slowdown of Chinese purchase for shipment in June-August 2010.

China will raise soy imports to record highs in May and June, it said. This buying interest is largely why Oil World forecasts global May soy exports will rise to 10.27 million tonnes, up from 8.06 million tonnes in May 2009, despite sluggish new crop soy selling by Argentine farmers following this year's large soy crops.

China's stocks of imported soy are rising despite an increase in crushings, a factor which could weaken prices, it said, noting that very large stocks available in the hands of South American farmers will have to move onto the market sooner or later.

Meanwhile, combined Argentine and Brazilian soy stocks could rise by 19.4 million tonnes on the year by end August 2010, it added.

"This will result in significant competition for US soy and products in September-February 2010-11, creating a bearish scenario for prices, as long as US weather conditions are favourable," it said.

Soymeal is also likely to receive considerable price pressure in the next 2-3 months due to rising output largely in South America, it said. This may add to pressure on soy prices.