August 4, 2003
China Soymeal Market Weekly Report - Overall Increase In China's Soymeal Prices During Week Ending August 1
An eFeedLink Exclusive Report
Soymeal prices across China for the week ending August 1 were mostly higher, with the southern provinces exhibiting a significantly greater increase compared to the north, especially in the case of Guangdong province, which saw a rise of RMB50/ton. Such regional difference can be attributed to an increase in feed demand in the south as well as the restrictive unloading of imported soybeans at the ports.
As at end of the week, the prices of medium grade soymeal in China were as follows:
CNGOIC experts forecast that, as a result of the price hike the year before, land use for soybean cultivation in 2003 would be 5.4% higher than the previous year. By June, the drought situation in the northeast has eased, but the per unit area yield for 2003 is expected to fall, and production is poised to reach 17 million tons. At the same time, market participants all predicted a huge soybean import volume for this year, averaging 17 million tons; some traders even projected imports of over 20 million tons.
Despite the continuously high volume of domestic and imported soybeans, there was no surplus soymeal volume in China in 02/03. This is mainly due to the robust increase in soymeal usage for feed consumption previously, in addition to the generally low soymeal and soybean stockpiles from the year before.
On July 29th, the first batch of 500,000 tons of state-held soybeans was successively auctioned off. The highest and lowest transaction prices at the auction were RMB2560/ton and RMB2420/ton respectively; the average transaction price was RMB2467.55/ton. The high bids offered for the mostly 00-02 stocks of old grains signaled the currently high market demand for feed ingredient soybean.
The Dalian soymeal contracts for August have gradually slowed down after peaking at RMB2333/ton early this week. Towards the end of this week however, it remained close to RMB2280/ton, far exceeding the other soymeal contracts. The August contract is a newly introduced contract, and the first variety for which a transaction has been completed since the warehouse's shift to the south. As such, it is closely watched by the market. However, all signs point to a likely guarantee for the fulfillment of the August soymeal contract.
Prices of U.S. soybeans and soymeal continue to fall this week. The market is still influenced by the excellent weather conditions in the central west for crop growing. As such, the soybean production for the new quarter is expected to hit a new high. From the current developments, prices are likely to continue falling in the near term; the costs of domestic soybean imports in the near term are anticipated to fall.
In all, there is still definite room for domestic soymeal prices to increase in the short term, because market sources has it that China is now implementing some restrictive measures on soybean import, such that many ships that arrive at the ports are unable to offload their goods. This has caused concern among many domestic feed millers. In addition, with the widespread low soymeal stockpiles in the feed mills' warehouses, many feed mills have begun expanding their procurement efforts, which is likely to start off another round of soymeal price hike.
In the long term, a surplus of domestic soymeal in the second half of the year is likely, as the soybean arrivals at the ports continue to increase, and domestic soymeal stockpiles continue to climb following the increased procurement volume by the enterprises. It is doubtful whether the increase in soymeal consumption will be able to match up with the increase in soybean volume. Pressure on the domestic soymeal market then will be tremendous.