July 30, 2007

China's soymeal prices to remain firm on high import cost

Despite the weak feedmeal demand, soymeal prices in China are unlikely to fall as the cost of importing soybean continues to be high.

Imported soybean accounts for about 60 percent of total soybeans crushed in China.

However, rising soymeal stocks and limited demand have forced many processing plants to reduce or even stop crushing, reducing the supply of soyoil.

As a result, soyoil imports have jumped by almost 50 percent to 1.13 million tonnes in the first six months, according to data from the General Administration of Customs.

Last week alone, Chinese traders may have cancelled up to four soybean shipments booked in earlier months due to pressure from existing soymeal stocks, according to a report by commodities analysis firm Shanghai JCI.

Traders expect soybean imports to fall further to around 2 million tonnes per month in the coming two to three months, when the trade usually slows because of the difficulty in preserving soymeal during the hot months.

During April to June, the country imported between 2 million to 3 million soybeans each month.

Reduced supply, along with high soybean futures prices at Chicago Board of Trade and high freight rates will help to support soymeal prices around the current range of RMB2,400 to RMB2,500/tonne, traders said.