August 23, 2004

 

 

China's Soybean Imports Affected By Bird Flu, Local Policies

 

China, the world's top soybean buyer, has struck deals to import more than 2 million tons of oilseed from the new US crop. But purchases could slow as Beijing takes steps to tighten credit and limit expansion of crushing capacities, a senior US trade official said.

 

In addition, a bird flu outbreak has dampened sales prospects in a year when the United States is heading for a record soybean crop of about 2.88 billion bushels, said Criss Davis, chairman of the US-based United Soybean Board.

 

"We already have significant sales to China on the books from the new crop," Davis told Reuters in an interview late on Wednesday on the sidelines on a regional grains conference.

 

"But the capacity expansion might not continue in the same pace as it was continuing for some time in China. They have moved to slow down their pace of growth as they were afraid of inflation. I personally see China's imports down." Shipments from the new US crop will start from October.

 

China National Grain and Oils Information Centre, the official think-tank, estimates the domestic Chinese soybean crop to hit a record 18 million tons this year due to favourable weather and expanded acreage.

 

Davis said that might keep a lid on China's purchases from overseas for some time. "China's soybean cycle coincides with ours. That could also have an impact."

 

China imported close to 17 million tons of soybeans in 2003/04. In the first seven months of 2004, China's soybean imports were down 12.1 percent to 10.78 million tons, according to customs figures.

 

Since April, Chinese crushers have cancelled or defaulted on contracts for about 3 million tons of high-priced South American soybeans after Beijing's credit curbs and months of negative crushing margins.

 

Davis said he feared that the defaults might also prompt other buyers in the region to do the same, adding that there was an urgent need to look at the contract clauses. " As a farmer, I was affected," he said. "We can't have a situation where contracts are not respected. The wash-outs are over but the fallout is not done yet."

 

Adding to the bearish outlook was the outbreak of bird flu for the second time in Asia this year, which has kept soybean and soymeal importers at bay. China, Indonesia, Vietnam and Thailand reported fresh outbreaks July, signaling that the virus was not going to disappear quickly.

 

"It's a difficult time in Southeast Asia. First it was high freight rates and now we have the bird flu. It's difficult for the industry to handle so many challenges. That has hurt demand, growth and opportunities." On the soymeal outlook, Davis said China would be making efforts over the long term to boost its imports to countries such as Japan and other Asian nations.