August 13, 2007

 

China's July soy imports may weigh on market demand

 

 

China's higher than expected soybean imports in July may put pressure on the market amid sluggish demand.

 

The country imported 3.03 million tonnes of soybeans in July, the highest monthly level so far this year, according to preliminary data issued Friday by the General Administration of Customs.

 

Analysts had expected soybean imports to be below 2.5 million tonnes in July due to slow demand from the feedmeal sector caused by a pig shortage.

 

China has been suffering from a pork shortage since the start of this year, due partly to an outbreak of blue ear disease since sometime last year, and pork prices have surged as a result.

 

July soybean arrivals were based on orders made from May to mid-June, when the impact from the worsening outbreak wasn't really being felt, said Pei Yong, research manager at Chinatex Grains & Oils Import & Export Corp.

 

Blue ear disease, also known as porcine reproductive and respiratory syndrome, has infected 120,144 pigs in China since June, nearly three times the number during the first five months of 2007, according to data issued by the Ministry of Agriculture.

 

Chen Weisheng, vice chief at the livestock husbandry department under the Ministry of Agriculture, said last month the tightness in pork supply in the market will only ease by the start of next year.

 

As a result, there will be an oversupply of soybeans in the short term, although the pressure may be somewhat offset by some good fundamentals, Pei added.

 

The ongoing drought, which has hit major soy producing regions in northeast China, has pushed domestic soybean prices in that area to as high as RMB3,400 a tonne this week compared with RMB3,100/ton a week earlier.

 

Soybean imports are likely to fall below 2.5 million tonnes in August before they pick up from September on an expected recovery of feedmeal demand and high soyoil demand, according to industry participants.

 

Shanghai JCI, a consultancy, expects soybean imports to be between 1.8 million to 2.1 million tonnes in August on the blue ear disease impact.

 

It also raised its soy imports forecast for September to 2.3 million to 2.4 million tonnes from 1.9 million to 2.1 million tonnes earlier.