August 11, 2010

Chinese soy to remain costly

China's uptrend in soy prices is expected to prolong due to rising domestic demand and the possible impact on global food prices from Russia's wheat export ban, said analysts.

China purchased a record amount in the first seven months of this year, mainly from the US, Argentina and Brazil. China's soy imports increased 16.2% on-year to 30.76 million tonnes in the first seven months, and average imported prices climbed 4% to US$439 per tonne during the same period, according to statistics released on Tuesday by China's Customs.

"It's an extremely sensitive time as so many uncertain factors could impact on soy prices," said Zhang Xiaoping, deputy director of American Soybean Association International Marketing.

After Russia said it would ban grain exports due to a severe drought, wheat futures soared on the global market. Analysts said this would also lead to price hikes for corn and soy.

Zhang said the good news is that this year is expected to be a bumper one in the main soy production areas in the US if there are no weather problems. The harvest season for soy is the end of August or early September. About half of China's soy imports are from the US, which are expected to hit 23 million tonnes this year.

China's imported 42.55 million tonnes of soy last year, up 13.67% over 2008. This year, the nation is expected to import around 50 million tonnes of soy, the China Soybean Industry Association said in late July.

"China buys more than half of the world's soy exports and China's increasing demand will support global soy prices and futures," he said.

The high level of soy imports is also partly due to China raising the quality threshold for soyoil imports from Argentina in April.

"The move fueled speculation that more soy will be needed this year to make oil and many companies ordered more soy," said Liu Zhaofu, general manager of China's Soybean Net.

It takes at least six weeks to ship the soy to China, so shipments in June and July soared, Zhao said. China imported 4.9 million tonnes of soy in July and a record of 6.2 million tonnes in June. China has yet to reverse the decision on soyoil imports from Argentina.

According to China Soybean Industry Association, domestic soy yields declined more than 10% in 2009 and yields will remain largely unchanged this year.