July 15, 2012

China's weekly state soy sales soar to 390,090 tonnes

Chinese soy crushers have raised purchases of the oilseed from the government's weekly cheap offers to the highest level since late 2010 as CBOT soy prices nearing highest levels boost the cost of imported soy.

The increased interest in state reserves comes as crushers seek to offset possible domestic shortages in coming months after dry weather late last year cut supplies from South America and with the US now suffering one of its worse drought in years.

A drop in supplies from Brazil and Argentina, the world's second- and third-biggest exporters, means crushers have only been able to source about six million tonnes of soy for September and October. Crushers need at least 10 million tonnes during the peak consumption season.

The government sold a total of 390,090 tonnes from state reserves on Thursday (July 12), the largest volume from a single sale since late 2010 and up from 165,667 tonnes last week. China imported 5.62 million tonnes of soy in June.

Analysts said the government planned to sell between two million and three million tonnes of soy stocks, some from harvests as early as 2008, representing about half of its current stock level estimated at between four million and five million tonnes.

Crushers in Hebei and Shandong provinces bought 382,975 tonnes at an average price of RMB4,005 (US$630) per tonne, according to bidding results.

Soy plants in the two provinces shift between domestic and imported soy while those in the northeast crush only domestic beans.

The average price was 11% lower than prices for imported soy offered at ports and more than 20% lower than current Chicago market prices.

Sales since December 2010 had attracted almost no bidders until May this year, when import prices jumped as a result of drought in South America. The Thursday sales bought total sales by the government since 2010 to 1.16 million tonnes.