June 28, 2012

Rising soy prices to boost China's edible oil profit revival

Soy price hike will remain in Q3 on weather concerns in US crop areas, and this may push up soyoil prices and thus lift the crushing profits of edible oil producers, the China Securities Journal reported on Tuesday (June 22).

Since the beginning of June dry weather in some regions of the US, the top soy producer in the world, has delayed the country's soy planting progress and raised expectations of a decline in its soy output.

Meanwhile, high-than-normal soy procurement from China and eased worries over the European debt crisis boosted soymeal prices to record highs.

With rising prices of soyoil and soymeal, the domestic crushing mills' average profits reached RMB158/tonne (US$24) in the first half of this year, significantly higher than the losses of RMB51/tonne (US$8) last year.

Market insiders note that US soy crops would enter a crucial growth stage in the July to August period. Given the absence of big systematic risks, speculation on the weather would constantly drive up soy products' prices in that period.

Furthermore, as China's inflation pressure is decreasing, the government's regulation on edible oil prices would be eased in the second half of this year.

In addition, the high level of pig stocks, coupled with a booming aquiculture season over the following three months, is expected to further stimulate soymeal prices and enhance crushing profits.

Dongling Grain and Oil Co., a major listed edible oil producer in China, is anticipated to benefit from the rally of the market for soy products in the third quarter.