September 17, 2009

China's weekly state soy auction on Wednesday (Sep 16) failed to attract bidders in Jilin and Inner Mongolia, with only 15,500 tonnes of soy sold in Heilongjiang, or 3.1 percent of the total volume offered.

The highest price paid was RMB3,790 (US$554.9) per tonne, a drop of about RMB100 compared with last week, when the market was concerned about a drought in the major soy-growing area of northeast China.

Xia Tian, a dealer at Zhejiang Yongan Futures, said buyers would not be interested in domestic soy reserves unless the US soy price goes up by US$12 per tonne. He added that crushers hold sufficient imported soy stocks so they can wait for the new soy harvest.

Beijing set the bidding price for domestic soy reserves at RMB3,750 per tonne, about four percent higher than the US crop slated for next January's shipment.

As the government purchased soy from farmers at RMB3,700 per tonne last year, it will suffer a loss unless it sells the state reserves at the current price, according to Dong Shuangwei, an analyst at Capital Futures.

China has begun to sell state soy reserves as part of its efforts to reduce stockpiles and free storage space ahead of the new domestic harvest due next month. However, only 85,300 tonnes were sold out of the huge state reserves in the nine auctions held so far.

China purchased about 7.3 million tonnes of soy for state reserves last year.