July 11, 2012

China's June soy imports up on strong livestock demand

Fuelled by strong demand from livestock breeders and expanded crushing capacity, China imported 5.62 million tonnes of soy in June, the most since November, customs data showed.

But the imports were lower than estimates by some analysts, who had expected China to match its June 2010 purchases of 6.2 million tonnes as most crushers are still trying to make up for a supply shortfall in peak consumption months August and September after drought reduced shipments from South America.

"We see a continuous increase in China's soy imports because of strong demand and also the fact that they are facing a shortfall in domestic production," said Ker Chung Yang, analyst at Phillip Futures in Singapore.

"Improved crushing margins are another thing that is encouraging higher imports. I think the demand in China is going to remain strong, which will sustain higher imports from the US."

The June imports were 31% higher on the year and up 6.4% from May's 5.28 million tonnes, according to figures from the General Administration of Customs of China released on Tuesday (July 10).

Rising incomes and changing diets have increased the amount of meat most Chinese consume, boosting the demand for soy, which is crushed and used in animal feed.

Chinese soy buyers had booked cargoes several months in advance, so they were unaffected by a recent spike in soy prices, official think-tank the China National Grain and Oils Information Centre (CNGOIC) said. The worst drought in almost 25 years drove US soy prices to a record high on Monday (July 9).

The CNGOIC forecast soy imports in July to ease slightly to 5.5 million tonnes, taking total imports in the current marketing year to a record 58 million tonnes, an increase of 11% on the year.

In May, some Chinese traders had cancelled orders for Brazilian soy due to low domestic crushing margins, and a CNGOIC analyst said the imported amount had not picked up as much as expected.

Drought late last year cut production in Brazil and Argentina, which supply more than half of China's annual imports. Official Customs data also showed that China, a leading edible oil consumer, imported 540,000 tonnes of vegetable oils in June, up 17.4% from the previous month.