October 2, 2006

 

China's soybean prices down on weak demand, early harvest

 

 

Soybean prices in China's major producing regions fell in the week to Friday (Sep 29) due to sluggish demand and an early harvest.

 

In Heilongjiang, China's largest soybean producing province, prices of average quality soybeans dropped moderately at the two main soybean trading centres.

 

In Harbin, the provincial capital, prices were quoted around RMB2,300 a tonne, down around RMB50 from last week, while prices in the north-eastern part of the province were around RMB2,200-2,240/tonne, RMB20 lower than a week earlier.

 

Prices were quoted around RMB2,400/tonne in Jilin province, another major soybean producing area in China's northeast, little changed from last week.

 

"Prices declined with the early harvest coming to the market," said Zhang Liwei, an analyst at the

China National Grain and Oils Information Centre.

 

Newly harvested soybeans, having a higher water content, usually sell at lower prices, compared to those of old crops, analysts said.

 

"Large crushing companies have almost halted large-scale purchases, waiting for the new harvest," Zhang added.

 

Abundant supply also contributed to the drop in soybean prices, according to local traders.

 

"Farmers in Heilongjiang province still hold around 20 percent of their last crops in stocks," said Zhang Yifan, a trader at China Grains and Oils Group Feed Corp.

 

Soybean production in Heilongjiang province hit 6.5 million tonnes last year.

 

Imported soybeans have had a substantial impact on prices of domestically grown soybeans, analysts said.

 

COFCO Futures Company said soybean import arrivals were a little more than 400,000 tonnes in Sep 10-20, with total arrivals less than 1.7 million tonnes for the whole month.

 

China National Cereals, Oils and Foodstuffs Corp, a major grain-trading company, holds a controlling stake in COFCO Futures.

 

Zhang Yifan expected soybean prices to fall further in coming weeks due to a decline in demand.

 

"After the National Day holidays, demand for edible oils and feed will fall, pressuring soybean prices," Zhang added.

 

Zhang Liwei agreed with Zhang Yifan, adding that, "Imports are expected to rise later this year as the upcoming soybean harvest may be better than expected in the US, further weighing on domestic prices."