June 22, 2009

Chinese crushers did not increase their soy imports much last week as they were anticipating abundant supplies until August when a possible release of state soy reserves could make up for lower imports, according to the China National Grain and Oils Information Centre (CNGOIC).

 

The centre's forecast of the state sales was reflected in prices on the Dalian soy futures market, which failed to follow the strong gains at the Chicago Board of Trade (CBOT) over the past week.

 

According to a report released by the centre, imports in June will be huge while those for July and August will be lower. However, the government can release its temporary reserves any time during the period, which is likely to ensure ample supplies in future months.

 

Meanwhile, the outlook for the soyoil market stayed bearish. Both futures and physical prices have been on the decline. Port inventories were on the upsurge and crushers were expected to cut prices. Demand for soyoil is expected to continue its fall amid ample supplies of rapeseed oil and palm oil.

 

With soymeal prices weaker than the previous week, some merchants have begun their stockpiling plans but demand has not significantly improved.

 

On the other hand, the government is likely to delay the sales of corn reserves to July but the sales of granaries' old stocks in the northeast under a rotation programme will boost supplies in late June. Prices have gone up in the northeast and northern regions due to tightening supplies. Meanwhile, corn consumption is unlikely to increase despite China raising the tax rebates on some corn products and the government's plan to stockpile frozen pork.

 

Wheat demand is seen steady in the coming two to three weeks as more plants are more willing to produce cheap new wheat to combat the sluggish flour sales. The state granaries have increased purchases of new wheat for state reserves but prices are unlikely to rise in the coming month as many mills have no plans to procure large volumes amid a bumper harvest.