China may increase soy purchases on profit outlook

China increased purchases in the past two weeks to between 17 and 25 cargoes, or as much as 1.5 million tonnes, as crushers expect processing margins to improve, according to executives familiar with the trade.

 

The cargoes were sourced mostly from Latin America except for two from the US Pacific Northwest, they said. Most shipments will be from July to September, with a few in October and November. Chinese buyers had curbed buying in recent weeks as port inventories surged. Each cargo weighs about 60,000 tonnes.

 

Demand for soymeal, a livestock feed made from the oilseed, is recovering in China even as stockpiles climb, according to grain.gov.cn, a state-run researcher. The country may buy 47.5 million tonnes of soy in 2009-2010, said the China National Grain & Oils Information Centre (CNGOIC).

 

''China's cash prices of soymeal have increased by RMB50 (US$7.36) to RMB150 (US$22) a tonne in the past week as the market expects demand to strengthen,'' said grain.gov.cn, owned by CNGOIC. ''International and domestic markets are improving, so prices of soy products may continue to recover.''

 

Soymeal for January delivery on the Dalian Commodity Exchange has climbed 3.5% to RMB2,844 (US$418.6) per tonne since touching RMB2,748 (US$404.5) on June 11, which matched the lowest level for the most-active contract in three months.

 

Demand for soyoil in China remains weak relative to consumption of soymeal.

 

Overall, inbound shipments of soy to China may fall to 3.5 million to four million tonnes in August from about five million tonnes in previous months after some crushers cancelled imports on surging arrivals, according to grain.gov.cn. Soymeal consumption may rise in the second half because of better hog demand, it said.

 

Soy imports may moderate in the second half after large shipments this year and will not be boosted by the easing of the Chinese yuan peg to the dollar, Barclays Capital said in a report dated Monday (June 21). The move to relax the peg may not affect imports of agricultural commodities significantly in the short term because an appreciation is likely to be gradual, the bank said.

 

Purchases were 19.6 million tonnes in the first five months, up from 17.4 million tonnes in the same period a year ago, according to customs. Imports may climb to 47.5 million tonnes in 2009-2010 from 41.1 million tonnes the previous year, the grain centre said earlier this month. That is more than half of global exports, according to USDA data.

 

China is the world's biggest soy importer.