June 8, 2009

The rise in Chicago Board of Trade soy prices (CBOT) is causing Chinese soy plants to operate at a loss as they crush soy imported from the US and South America, according to an official survey by the China National Grain and Oils Information Centre (CNGOIC).

Imported soy for July shipment rose to more than RMB4,300 (US$629.1) per tonne following the CBOT soy hitting its highest level since mid-September last year, leading crushers to post losses after selling their soy products at current prices, according to the centre.

The centre said domestic crushers and companies are losing their interests in ordering imported soy over the past days and the large volume of imports scheduled to arrive in June would keep domestic supply sufficient.

Meanwhile, Chinese buyers have cancelled two to three US soy cargoes in the past week.

China's soyoil market stayed bullish last week, which was supported by the rising costs for imported soy. However, large soy and soyoil imports in the coming months may restrain demand following rising prices for soyoil, the centre added.

On the other hand, the soymeal market picked up as the soy price rise led feed mills to stockpile their inventories. Demand for the feed ingredient, while likely to stay below normal, was expected to pick up slightly.

Corn traders were awaiting the government policy on sales of state reserves. Corn prices in the northern region rose significantly as farmers' supplies were diminishing. Corn demand from hog breeders stayed sluggish but the declining pork prices eased in some areas.

As for the wheat market, lower prices are anticipated this year compared to last year due to the bumper harvest. Flour demand in China remained weak.