August 6, 2009

Following the two earlier rounds that failed to attract purchasers, China continued to receive poor response in its third attempt to auction state soy reserves on Wednesday (Aug 5) as less than one percent of soy stocks was sold.

According to the National Grain and Oil Trade Centre, the auction in Inner Mongolia recorded the sale of 4,300 tonnes of the 101,400 tonnes of soy on offer while Heilongjiang sold 600 tonnes from about the 300,000 tonnes on offer.

There were no bids in Jilin province where a total of 100,600 tonnes of soy was up for auction.

The Wednesday's auction of 500,000 tonnes of soy from silos managed by state-owned Sinograin had widely been expected to draw a lukewarm response. The previous two rounds had failed as the offer price was about RMB200 (US$29) higher than the cost of imported soy.

China unveiled its first soy reserve auction early in July in response to a series of supply shortages that had left many crushers in Heilongjiang on the brink of closure.

The benchmark Chicago Board of Trade prices fell to a 3-½ month low in July as traders feared the auction by China, the world's top buyer of soy, would restrain the increase in imports, which had risen 28 percent in the first half of the year.

The market has recovered since as investors expected poor response to the government auction.

Traders said the slight buying interest in Inner Mongolia and Heilongjiang was due to higher international prices, which have raised the Chinese import costs above the minimum price of RMB3,750 per tonne set for selling the government's stockpiles.

Imported soy were quoted around RMB4,000 per tonne at Tianjin and Dalian ports, following the 15 percent surge in CBOT prices over the past week.

US$1=RMB6.834 (Aug 6)