August 19, 2009

China's State Council is considering a proposal to give subsidies of RMB200 (US$29.3) per tonne to assist plants in the northeastern region crush domestic soy, traders said on Tuesday (Aug 18).

The move would aid the sale of huge stockpiles of state soy reserves but unlikely to hurt imports as soy plants in the inland province of Heilongjiang crushed only domestic crops, traders added.

The subsidy was proposed as buyers showed lukewarm interest to the government's weekly soy auctions due to the high prices, resulting in light trade of the state soy reserves. China was eager to sell its reserves to free storage space ahead of a new harvest in two months' time.

Soy plants in the coastal areas of China have increased their imports of new US soy crops over the past weeks following the recent improvement of crushing margins.

After lower imports for September and October, the subsequent projected monthly imports will be back to normal level or at about three million tonnes per month, according to a soy trader.

China's soy imports in August are likely to drop to around three million tonnes from the record June imports of 4.71 million tonnes and 4.4 million tonnes in July.

With the subsidy, crushers in Heilongjiang will be more willing to purchase soy from state reserves as many encounter supply shortages after the government's soy stockpiling campaign, which dried up the supplies in the area.

An industry source said the price of RMB3,550 (US$519.4) per tonne will be accepted by crushers in Heilongjiang to buy soy from the state reserves as they are unable to source enough soy from the market.