September 3, 2009

China's soy importers are expected to stay on the sidelines this week after buying large volumes of the new US soy crop late last month in response to wide price spreads between the US and the Dalian Commodity Exchange, traders said on Wednesday (Sep 2).

In the last two weeks of August, Chinese importers bought more than 25 cargoes of the new US soy crop. With each cargo holding 55,000 to 60,000 tonnes, the huge volumes pushed up US soy premiums and narrowed the spread.

Some traders have estimated that Chinese buyers have booked more than 13 million tonnes of new orders, including a small amount of new South American soy.

By selling soymeal and soyoil from the Chicago Board of Trade in Dalian, buyers could make a profit of between RMB100-200 (US$14.64-US$29.28) per tonne, one trader estimated.

However, they are unable to earn any more profit after US soy premiums rose. Furthermore, China has already bought up all the supplies from September, October and November shipments, said one industry analyst who follows the soy market.

According to estimates by the China National Grain and Oils Information Centre, soy imports in August and September are likely to be in the range of 2.6 to 2.8 million tonnes per month, down from more than four million tonnes in June and July.

While overseas procurements have stayed strong, the Chinese government's efforts to sell off its state reserves have received only a lukewarm response thus far.

At the latest auction on Tuesday (Sep 1), only 10,600 tonnes of soy were sold, 2.1 percent of the total 500,000 tonnes on offer.

Traders have indicated that the minimum bidding prices set by the government remain far too high for crushers to make profits.